US equities edged lower, except for technology stocks as standstill fiscal talks in the US limited the appetite for more equity purchases as the major US indices fluctuated near their all-time highs. The treasury yields rose after the record 30-year US bond auction saw weak demand on Thursday hinting that the heavily swamped debt market couldn’t absorb the additional debt easily.
Meanwhile, US President Donald Trump refused to fund the US postal services to increase his chances of delaying the November presidential election, amid surveys started showing up to double digit advance for his rival Biden. And the markets don’t even react badly to an eventual Biden victory on reassurance that under the actual circumstances, Democrats can’t take any steps to harm the financial markets, anyway. Right now, Biden victory is seen as neutral for the stock markets, some believe that there could even be some positive in switching the government after two years of tense relationship with China, and trade frictions with other countries as well.
Stocks in Asia traded mixed after China posted the biggest jump in industrial production in six months in July, but the 4.8% y-o-y rise missed the consensus of analyst expectations of 5.1%. Chinese retail sales unexpectedly dropped 1.1% however, leaving the market skeptical about the pace of the recovery.
Trading on FTSE (-0.09%) and DAX futures (-0.22%) hint at a lackluster open in Europe.
The US dollar reversed the early week gains, but improved US yields helped limiting the dollar’s weakness on Thursday. The US weekly jobless claims fell below 1 million for the first time since the beginning of pandemic, still very high but pointing at a gradual recovery in the US jobs market.
The euro remained offered past the 1.1850 and the pound rebounded from 1.3120 against the US dollar. A better dollar appetite should encourage a further downside correction in both euro and sterling against the greenback, as the overstretched short USD positions are mainly responsible for the actual trading levels and a downside correction would be healthy to match the fundamentals in both pairs.
Due today, the second quarter GDP read should confirm a 12% decline in the Eurozone economy, as inflation remains low due to depressed activity. Germany and Spain printed inflation below zero in July, while consumer prices in France may have improved due to a boost in summer demand. Still, the overall picture calls for a decent government and central bank support and keeps the European Central Bank (ECB) doves in charge of the market.
By Ipek Ozkardeskaya
