The markets started the week on a chill note as traders stayed on the sidelines ahead of this week’s potential catalysts.
Crude oil was an exception though. The Black Crack shot up and barely looked back!
Check out the market themes that moved the markets on Monday:
Headlines:
- Over the weekend, Israel and Lebanon’s Hezbollah reportedly exchanged heavy fire and risked an all-out war across the Lebanon-Israel border
- As expected, the PBOC kept its one-year MLF rate at 2.3% and its seven-day reverse repo rate at 1.7% in August
- Libya’s eastern government announced the halt of exports and closure of all oilfields in eastern Libya
- Germany Ifo Business Climate Index fell from 87.0 to 86.6 in August; “The German economy is increasingly falling into crisis“
- U.S. durable goods orders jumped by 9.9% m/m in July; Core durable goods dipped by 0.2% (0.0% expected, 0.4% previous)
- China Conference Board leading index improved from -0.3% to 0.0% in July
- U.K. BRC shop price index decreased by 0.3% y/y in August after a 0.2% increase in July; “Renewed inflationary pressures could be lurking just over the horizon“
- Japan services producer price index slowed from 3.1% y/y to 2.8% y/y (2.9% expected) in July
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
Major assets kicked off the week quietly as investors processed last week’s Jackson Hole insights and stayed cautious ahead of this week’s potential market movers.
Volatility spiked during the European session after news broke that Israel and Hezbollah narrowly avoided an all-out war in southern Lebanon over the weekend. Libya shutting down its eastern oilfields also likely boosted oil prices, with WTI crude jumping from $75.50 to $77.50 before easing to $77.00.
In the U.S., a mixed durable goods report was largely overlooked as traders focused on the Fed’s September rate cut. Despite this, U.S. stocks had a mixed day: the Dow hit a new record high, while the Nasdaq and S&P 500 pulled back ahead of Nvidia’s earnings release.
Gold stayed near its record highs, bitcoin (BTC/USD) slipped to $63,000, and U.S. 10-year yields edged up from 3.77% to 3.82%.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Major Currencies Chart by TradingView
The U.S. dollar started the week on a weak note against its fellow safe havens following JPow’s dovish remarks on Friday. The Japanese yen, in particular, saw broad gains and new intraday highs at the start of the European session before ending the day with mixed results.
“Risk” currencies like the Aussie, Kiwi, and the British pound saw upswings at the start of the U.S. session, but the good vibes didn’t last for long as fears of escalating tensions in the Middle East and caution ahead of the week’s data releases soon took over the markets.
The Canadian dollar held a party for one as it took cues from higher crude oil prices and capped the day higher across the board.
Upcoming Potential Catalysts on the Economic Calendar:
- BOJ core CPI at 5:00 am GMT
- Germany final GDP at 6:00 am GMT
- German GfK consumer climate at 6:00 am GMT
- U.K. CBI realized sales at 10:00 am GMT
- U.S. house price index at 1:00 pm GMT
- U.S. CB consumer confidence at 2:00 pm GMT
- Australia CPI at 1:30 am GMT (Aug 28)
Traders may have to take cues from risk sentiment for another day today as we only have lower-tier reports on the docket.
Watch out for headlines that may affect geopolitical tensions in the Middle East, as well as potential positioning ahead of this week’s more closely watched data releases.
