Stocks calm, dollar in demand, gold slips
It has been a lacklustre session in equity markets today as it seems that some dealers are keen to sit on hands ahead of the Jackson Hole Symposium, which kicks off tomorrow. Towards the end of last week, stocks tumbled due to concerns the Federal Reserve might look to taper its bond buying scheme later this year. To a lesser extent, the worries about tighter regulation in China also weighed on stocks, but the Fed story remains on traders’ minds. Even tough indices are not making much headway today, the S&P 500 is within a whisker of retesting its all-time high, and the DAX 30 is less than 0.5% from its record high, so that says a lot about how traders are feeling ahead of the Jackson Hole event.
The US dollar has handed back most of its earlier gains, but it is still up on the day. On Friday, it hit a new nine month high due to speculation the Fed might look to trim its bond buying scheme sooner than expected, but the greenback lost ground in the past two sessions. Today’s durable goods report came in at -0.1%, ahead of the -0.3% consensus estimate. Robust consumer activity is needed to help ensure the economic rebound continues, so the goods data doesn’t tie in with the wider view the economy is recovering. There have been several sub optimal economic reports from the US recently, but it still seems the Fed is in the lead with respect to potentially tapering its stimulus scheme first, as far as the major central banks are concerned.
Gold and silver have lost their shine because of the move higher in the dollar, the inverse relationship between the metals and the currency is working against the commodities. Both metals have been trending higher since the flash crash that was witnessed earlier this month, but the Jackson Hole Symposium is likely to inject major volatility into the bullion market.
WTI and Brent crude gained ground following the release of the EIA inventory data. The update showed that US oil and gasoline inventories dropped by 2.97 million barrels and 2.2 million barrels respectively, both were larger draws than expected. The figures suggest that demand is robust, hence why stockpiles are falling, this feeds into the narrative the US economy is rebounding.
