Daily Comments

Following yesterday’s directionless trade in the U.S., Asian markets were mixed. The Nikkei 225 fell -0.12% and the Shanghai Composite was off -0.14%. Eurozone Q2 GDP was right on expectations at +0.6%. European equities finished with solid gains. The DAX rose +0.71%. Yields on the 10-yr. Bund are still rising, now at 0.437%. July Housing Starts at 1.16M were well below expectations. Last night, the API reported a much larger than expected draw in U.S. crude inventories of -9.2M barrels. This morning, the EIA reported a draw of -8.9M barrels, but also reported an increase in production. Minutes from the July 26 FOMC meeting hinted at the beginning of debt drawdown in September but gave no clues about the timing of the next rate hike. Yields on the 10-Year Note fell to 2.238%. The US$ Index reversed earlier gains to close lower. December gold added +0.3% to $1,282.90. Despite the inventory draw, September crude fell -1.6% to $46.78. A strong session reversed when President Trump dissolved two advisory councils. Political turmoil wasn't enough to induce heavy selling, and at the close, markets were still modestly higher.

China July new yuan loans and aggregate financing were both above expectations. After a North Korean media report that President Kim Jon Un had decided NOT to launch missiles in the direction of Guam, Asian markets were mostly higher. The Nikkei 225 was up +1.11% and the Shanghai Composite rose +0.44%. German Q2 GDP was up, but less than expected. European equities finished with modest gains. The DAX rose +0.10%. Yields on the 10-yr. Bund moved up to 0.427%. June Business Inventories were up +0.5%. July Retail Sales climbed +0.6% (+0.5% less autos), Import Prices were up +0.1%, and Export prices rose +0.4%. The August Empire State Manufacturing Survey was a robust 25.2 and the NAHB Housing Market Index was strong at 68. Yields on the 10-Year Note advanced to 2.273%. The US$ Index was strong. December gold pulled back -0.8% to $1,279.70. September crude cut early losses to close down -$0.04 at $47.55. A strong start on the heels of yesterday’s rally faded quickly with markets trading in a tight range near the flat line for the rest of the day. The small-cap Russell 2000 was under pressure, but other indexes closed narrowly mixed.

Japan Q2 GDP was stronger than expected, but China July industrial production, up +6.4% y/y, was light and the smallest pace of increase in 7 months. Asian markets were mostly higher, although the Nikkei 225 was down -0.98% following Friday’s holiday. The Shanghai Composite rose +0.88%. Eurozone June industrial production was weaker than expected. European equities bounced back strong from last week’s selloff. The DAX rose +1.26%. Yields on the 10-yr. Bund firmed back above 0.4% to 0.409%. There were no economic reports released today. Yields on the 10-Year Note rose to 2.220%. The US$ Index had a solid day, but is still at its lows for the year. Geopolitical tension dialed back and December gold fell -0.3% to $1,290.40 September crude sank -2.5% to $47.59. With the imminent threat of war fading, markets calmed down and equities surged higher. This follows the pattern of buying any breaks that has been holding for some time. Most of the gains were made in the first hour with the rest of the day consisting of sideways trading on light volume. Still, at the close market were broadly higher.