Market Roundup
• U.S. factory activity slips; construction spending hits 1-year low.
• U.S. July ISM 52.6 vs forecast 53.0 and 53.2 in June.
• U.S. crude breaks below $40/bbl as oil slumps 4 pct on glut worry.
• Brazil 2017 inflation forecast drops sharply -central bank poll.
• Mexico factory index slips to over 2-1/2-year low in July.
• Europe's stress tests fail to ease bank sector concerns.
• Recession ahead in Britain? Factories slow, business confidence tumbles.
Looking Ahead - Economic Data (GMT)
• 1:30 Australia Trade Balance Jun forecast-2000m -2218m -previous
• 1:30 Australia Building Approvals Jun forecast 0.50% -5.20% - previous
• 5:00 Japan Consumer Confidence Index Jul 41.8 - previous
Looking Ahead - Events, Other Releases (GMT)
• 04:30 Australia – RBA rate meeting, 25 bps cut expected
• 10:15 US -- Dallas Fed President Kaplan speaks on "Economic Conditions and Implications for Monetary Policy" in Beijing
Currency Summaries
EUR/USD is likely to find support at 1.1124 levels and currently trading at 1.1162 levels. The pair has made session high at 1.1180 and hit lows at 1.1154 levels. Euro declined slightly against US dollar on Monday as greenback rebounded after its poorest weekly performance in three months the previous week, helped by gains against the yen, which pulled back from Friday's three-week highs after the Bank of Japan eased policy less aggressively than expected. The dollar shed 2 percent last week against a basket of currencies after the Federal Reserve gave no hint it would raise interest rates soon, and on disappointing U.S. growth data at the end of the week. New York Fed President William Dudley said at a central bankers' conference in Bali on Monday that the Fed might raise rates before the November U.S. election if the economy and labor market improve quickly, although he added that the Fed should be cautious.On the data front, U.S. manufacturing activity eased in July. The Institute for Supply Management's (ISM) report showed National factory activity slipped 0.6 percentage point to a reading of 52.6 last month.
GBP/USD is supported in the range of 1.3118 currently trading at 1.3186 levels. It reached session high at 1.3220 and hit low at 1.3180 levels. Sterling slipped against the dollar on Monday, as a manufacturing survey brought more worrying signs on the economy before a Bank of England meeting expected to cut interest rates to a record low. The survey of purchasing managers for July had been forecast to replicate the results of a one-off flash poll two weeks ago. Instead, it was slightly worse, another hint of an economic backlash from June's Brexit vote. The index fell to 48.2 in July from 52.4 in June, its lowest since February 2013. The pound has recovered some ground since a dramatic 14 percent fall after the vote on June 23 to leave the European Union, and it gained more than 1 percent on Friday to trade above $1.33, helped by a disappointing batch of U.S. growth data. Sterling fell as much as half a percent to hit low at 1.3180 in the late US session.
USD/CAD is supported at 1.3020 levels and is trading at 1.3106 levels. It has made session high at 1.3113 and lows at 1.3070 levels. The Canadian dollar declined against its U.S. counterpart on Monday as oil prices tumbled on heightened worries of an oil glut, putting pressure on energy shares and giving pause to global equity prices, which have rallied to their highest in nearly a year. A 15-percent slump in U.S. crude prices in July, the worst monthly loss in a year, triggered liquidation as trading began for August and U.S. crude fell below $40 per barrel for the first time since April. Lower oil prices hit energy shares and global equity prices pulled back a little after rising to the highest in nearly a year. MSCI's world stocks index, which tracks shares in 45 nations, was down 0.14 percent. The U.S. dollar recovered some ground against a basket of major currencies after its worst week in three months. Growth in U.S. gross domestic product in the second quarter came in below expectations on Friday, fuelling speculation that the Federal Reserve may not pull the trigger on raising interest rates anytime soon.
AUD/USD is supported around 0.7500 levels and currently trading at 0.7552 levels. It hit session high at 0.7572 and made session lows at 0.7548 levels. The Australian dollar initially rose against US dollar on in the Asian session but declined in the US session as the dollar rebounded from Fridays close. The Australian dollar initially popped to a two-week high of $0.7616, adding on to a 1.3 percent gain on Friday but declined in the US session as the Aussie was weighted down by recovery in dollar and falling crude oil prices. It was last trading at $0.7535 with support at $0.7490 and resistance at $0.7650.The Aussie's gain of 2 percent will only add to the case of an interest rate cut by the Reserve Bank of Australia (RBA).The central bank holds its monthly policy meeting on Tuesday and a majority of economists favour a basis point to a new low of 1.5 percent. The dollar rose 0.2 percent against a basket of six currencies, crawling away from its lowest since July 5 hit on Friday. Global equity prices steadied near their highest in almost a year. Markets will closely monitor this week's data, which includes the monthly non-farm payrolls report on Friday.
Equities Recap
European shares closed lower on Monday, dragged down by banks such as UniCredit and Raiffeisen that performed poorly in a Europe-wide stress tests.
UK's benchmark FTSE 100 down up by 0.4 percent, the pan-European FTSEurofirst 300 ended the day down by 0.53 percent, Germany's Dax ended flat, France’s CAC finished the day down by 0.6 percent.
The S&P 500 and the Dow closed slightly lower on Monday, as a drop in oil prices dragged down energy stocks, while tech names Apple and Alphabet helped lift the Nasdaq to its highest close in over a year.
Dow Jones closed down by 0.15 percent, S&P 500 ended down by 0.14 percent, Nasdaq finished the day up by 0.42 percent.
Treasuries Recap
U.S. Treasury yields rose on Monday from Friday's multiweek lows as Microsoft Corp launched the fifth largest corporate bond offering of all time, drawing appetite away from safe-haven U.S. government debt, and on profit-taking.
U.S. 30-year Treasury debt prices fell more than a full point in price, with yields hitting a session high of 2.249 percent. Yields had hit a more than two-week low of 2.177 percent on Friday.
U.S. 30-year Treasuries prices were last down 1-15/32 to yield 2.2471 percent, from a yield of 2.182 percent late Friday.
Benchmark U.S. 10-year Treasuries prices were last down 14/32 to yield 1.5077 percent, after touching a more than two-week low in yield of 1.450 percent Friday.
Three-year Treasuries prices were last down 3/32 to yield 0.7795 percent, from a nearly three-week low in yield of 0.747 percent touched Friday.
Commodities Recap
Gold was little changed on Monday, hovering just below the prior session's near three-week top as investors cut expectations for a U.S. interest rate hike in the near term.
Spot gold was up 0.2 percent at $1,353.29 an ounce by 2:43 p.m. EDT (1843 GMT). U.S. gold futures for December settled up 0.2 percent at $1,359.60 per ounce.
U.S. crude tumbled below $40 per barrel on Monday for the first time since April, as oil prices settled down nearly 4 percent on heightened worries of a crude glut despite peak summer fuel demand.
U.S. West Texas intermediate (WTI) crude plumbed $39.86, its lowest since April 20, before settling at $40.06, down $1.54, or 3.7 percent.
Brent crude closed down $1.39, or 3.2 percent, at $42.14 a barrel, after a session low of $41.87.
