Beyond Meat at New Record, UK Unemployment, Redbook Store Sales
The US dollar stabilized at a slightly higher level than on Friday after the disappointing NFP numbers, but was unable to make a significant recovery. The dollar is under pressure as investors are increasingly speculating that the Federal Reserve could announce a rate cut soon, especially after comments going in that direction from key decision maker of the central bank last week.
After oil prices opening higher on Monday night, which was attributed to the deal reached between the United States and Mexico, prices moved lower in the late afternoon. Ahead of the scheduled OPEC meeting there is still uncertainty what Russia’s position will be in regards of continued supply cuts as the key players Russia and Saudi Arabia are reportedly also disagreeing as to at what level prices should be, with the Saudis pushing for actions to assure higher market prices.
Equity markets followed up on the positive sentiment from last week and continued moving higher by Monday. Especially the technology index NASDAQ (US Tech 100) showed a strong performance and reached a new 3-weeks high.
On Tuesday in the UK data on unemployment and average earnings will be released. From the US small business optimism and store stales statistics are expected. Later in the Asian-Pacific trading session producer price index (PPI) data will be released in Japan and China. Also the Chinese consumer price index (CPI) for May should be released.
The EUR/USD pair dipped again below the 1.13 level during trading on Monday, before moving again higher before mid-day. A significant driver for the currencies was the dollar weakness, following ever increasing expectations that the Federal Reserve would act proactively against a possibly slowing economy and lower interest rates to accommodate the markets.
Relatively few data releases are expected on Tuesday, while on Wednesday the US consumer price index (CPI) might be in the spotlight of investors. Later inflation data also from Europe will come in, like Germany on Thursday and France and Italy on Friday.
Gold prices came down from the recent 14-months high after the US reached a deal with Mexico without having to impose any punitive tariffs over the issue of illegal migration.
According to analysts, gold prices have been recently supported by a market sentiment expecting the Federal Reserve to cut interest rates, as well as higher purchases of physical gold by central banks. New reports indicate that the Chinese central bank increased its net purchases of gold in May for the sixth month in a row. The Chinese gold reserve increased by 1.88% to a value of close to $80 billion in May.
The interest rate decision by the Federal Reserve next week could also have implications for the price of gold, as in theory gold prices are connected to interest rates and also the strength of the dollar, with lower rates reducing the opportunity costs of holding gold compared to US Treasury Notes which bear interest.
Oil prices opened higher on Monday following the agreement between Mexico and the US, with the US suspending the threat of tariffs against its Southern neighbour. While the ongoing trade conflicts and indications of a possibly approaching declining economic cycle and also increasing oil stockpiles are already putting a downwards pressure on oil prices, the upcoming OPEC meeting in two weeks could have further implication for the energy markets. While OPEC countries, led by their key oil producer Saudi Arabia seem in agreement to continue with the current production cuts in order to stabilize oil prices at a higher level, according to the Saudi Arabian Energy Minister Russia remains the only current participant who did not clearly indicate whether or not they will also continue with the production cuts.
On Tuesday the American Petroleum Institute (API) will publish its weekly crude oil stockpiles numbers, followed by the Energy Information Administration (EIA), which will release its weekly numbers on crude oil, distillate and gasoline inventories on Wednesday.
Stock indices moved again higher on Monday with especially shares in the chip industry (US Semiconductors ETF +2.43%) closing significantly higher.
While shares of United Technologies (-3.00%) and Raytheon moved initially higher on the announcement that the two aerospace and defence companies are planning a merger, shares closed lower after with one possible factor being the US President Donald Trump’s comment, that he would be concerned that such a move would harm competition and make negotiations more difficult for the US government.
Shares of the California based meat substitute company Beyond Meat (+20.46%) again surged higher, reaching a valuation of more than seven times the $25 IPO value at the peak of the intraday session. Analysts explained the heightened interest in the company over its strong exposure and underlying business movement as well as a strong gross margin.
For Tuesday the releases of the NFIB Small Business Optimism Index and the Redbook store sales statistic are expected.
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