Global Equities Higher

STOCK INDEX FUTURES

Global equity markets were higher except for the Spanish market with most markets tracking positive and posting gains between 0.09% and 2.8% in Shanghai! Technically the S&P has extended bullish sentiment with a higher high this morning but that is partially countervailed by the lack of a new high in the recent leadership index (the Dow). On the other hand, a slight upward tick in US treasury yields combined with escalating concern of a UPS strike Monday should leave some investors on edge. Nonetheless, investors seem to be consistent in embracing the end of the US rate hike cycle which in turn could make tomorrow afternoon’s Fed statement an extremely critical pivot point for markets that have rallied aggressively this month.

As indicated already the S&P posted a 3-day high early but did not usurp last week’s new high for the year. However, today’s US scheduled report slate window will offer significant direction to equities with two house price measures potentially adding to market expectations of a pause by the US Fed after tomorrow’s hike. While the Dow has surrendered its bullish leadership role this morning with the S&P posting a 3-day high and the Dow trading in negative territory, the Dow remains just under the 2023 highs and remains in a bullish technical set up.

CURRENCY FUTURES

DOLLAR: While the new high in the dollar this morning is not significant, the action provides the bull camp with fresh technical confidence. The dollar looks to extend on the upside with a filling of a gap from earlier in the month with a trade above 101.315. However, the dollar could see temporary back and fill action if this morning’s US house price data shows softening, as that could add to the well-entrenched view that the US Fed will pause after tomorrow’s hike announcement. Furthermore, the dollar might also show minimal selling following today’s US Richmond Fed manufacturing index reading for July. Nonetheless, the overall trend looks to eventually shake out to the upside with the dollar gaining 102.00 later this week or early next week.

EURO: While a measure of corrective setback action in the dollar following today’s US scheduled data is possible, European economic data overnight favored weaker economic prospects in Europe with two of 3 German Ifo readings producing negative results. In the end, the euro has severely damaged charts and might have little in the way of support until 1.1065, which probably leaves an ultimate target on this wash down at 1.10.

YEN: Given the Yen has managed to halt a pattern of significant selling from last week’s new low for the move, continued respect of consolidation support at 71.00 is possible through US scheduled data this morning. However, we see the technical and fundamental trends remaining down in the Yen with the currency ultimately returning to the early July lows and in turn rekindling threats of intervention from the Bank of Japan.

SWISS: Obviously, the Swiss charts remain bearish with a fresh new low for the move overnight and little in the way of close in support because of the rapid upward explosion in the Swiss on July 12th. Therefore, a slight bounce in the Swiss from US scheduled data should be seen as an opportunity to implement fresh shorts.

POUND: Even though the Pound has become oversold after 3 weeks of aggressive selling, noted weakness in GBP PMI data yesterday and signs of an ongoing uptrend in the US dollar leave the bias in the Pound pointing down. Selling resistance in the Pound today is 1.2868 with near term targeting seen down at 1.2750.

CANADIAN DOLLAR: While not an exciting or potential profitable opinion, the Canadian looks to remain range bound by countervailing fundamentals. On the bear side of the equation, the trade has settled on a view that the Bank of Canada will be on hold for the rest of this year and from signs the Canadian economy is losing momentum. Supporting the Canadian is surging petroleum prices and periodic positive correlation with the US dollar. We see the trading range in the Canadian ahead as 76.28 on the upside and 75.66 on the downside.

INTEREST RATES

With a fresh 8 day low early today, positive global equity market action and a litany of fresh economic support promises from the Chinese government, treasury prices should see selling from classic fundamental forces. In retrospect, the bull camp should also be discouraged with the anemic response to yesterday’s 2-year note auction with treasury bond prices following the auction results showing minimal declines which in turn signals the potential for weakness in treasury futures prices following today’s 5 year note auction. On the other hand, the analyst surveys had divergent views with one analyst predicting lower rates at a slower pace, another analyst predicting a deeper yield curve inversion and another analyst indicating the market has priced in too much tightening of roughly 230 basis points over the coming few years. However, another survey indicated that 54% of those surveyed expected yields on 10-year treasuries to fall over the next month which according to the surveyors was the highest expectation for lower yields in nearly 12 months. Data from Europe overnight provided two disappointing German Ifo readings and one positive German Ifo reading. In another bullish development which we are highly suspicious of the fear gauge is reportedly hovering at 2008 levels, but some analysts think that is the result of fear of extreme price volatility instead of a sudden explosion of haven buying interest. In the short-term, today’s US economic report slate will provide two price measures of housing prices which takes on added importance because of the Fed meeting tomorrow. Expectations for today’s housing price data call for a smaller gain in the US housing price index and a larger contraction in the S&P case Shiller home price index than was seen last month. The North American session will start out with a private weekly survey of same-store sales followed by June Canadian manufacturing sales which are forecast to have a sizable downtick from May’s 1.2% reading. The May Case-Shiller home price index is expected to have a mild downtick from April’s -1.7% year-over-year rate. The May FHFA house price index is forecast to have a moderate downtick from April’s 0.7% reading. The Conference Board’s July reading on consumer confidence is expected to have a mild uptick from June’s 109.7 reading. The Richmond Fed’s July manufacturing index is forecast to have a moderate uptick from June’s -7 reading. A busy day for earnings announcements will include Danaher, Texas Instruments, NextEra Energy, Raytheon Technologies, Verizon, and General Electric before the Wall Street opening while Microsoft, Alphabet (Google) and Visa report after the close.

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