Nasdaq Posts New Record Close, Dollar Mixed

Equities

US stocks rose on Monday as investors shrugged-off recent trade tension fear. The US stock market was under pressure since early 2018 by trade war talks, inflation, and higher yields. However, investors have confidence that the US economy is healthy and the companies are doing well. Analysts are expecting the earnings growth of the second quarter to surpass 18%. The Dow Jones Industrial Average rose almost 200 points to get back in the positive territory for the year. The S&P500 was able to break to a two-and-a-half month high as the risk appetite strengthened after the jobs report on Friday. The Nasdaq Composite posted a new record close for the first time since early March boosted by the all-time-high Apple shares and the news that Microsoft is acquiring GitHub. Nasdaq is almost 10% up this year, which confirms the strength of the technology sector.

USD

The greenback recovered most of its early-Monday heavy losses to end the day on small losses. The dollar index, DXY, which measures the dollar strength versus a basket of major currencies is trading in a tight range since last week. The dollar was solid against the Japanese Yen and Swiss Franc but softer against the Euro. This effect confirms that investors are favoring the risk-on trading mode. In terms of data, ISM Non-Manufacturing PMI for May is due today.

GBP

The British pound fell against the US dollar to end a three-day winning streak. The headlines related to the Brexit are adding pressure to the currency. Cable dropped heavily since mid-April as the economic reports showed that the economy was performing well in the first quarter of 2018. Investors favored the Sterling to the dollar since early last week as they expected the economic indicators to show that the economy is picking up in the second quarter. However, yesterday's decline erased the gains. The construction PMI for May is at 52.5 versus an expectation of 52. The Services PMI for May is due today where analysts expect a reading of 52.9.

AUD

The Australian dollar dropped slightly against the US dollar as the Reserve Bank of Australia kept the interest rate unchanged at 1.50% for a record of twenty-two month. The bank noted in the statement that the global risks are mounting especially with the trade tension between US and China, and the political unrest in Italy. However, they are optimistic about the future wage growth. The first quarter GDP is due tomorrow morning where analysts expect a strong reading as they believe that the rise in exports and government spending boosted the economic growth.

Gold

Gold prices tumbled for the third consecutive day as investors rushed to risky assets due to the positive outlook from the United States and the improvement in the Italian political situation. Gold fell to a low of $1289 and is now almost one percent down for the year. Gold prices could face more pressure if the US Treasury yields rise again and the trade tensions ease.

Oil

The concern of a rise in crude production from top oil producers is weighing on oil prices. Brent and WTI dropped for the third consecutive day. The West Texas Intermediate posted a two month low and crossed below the 100-day simple moving average for the first time since mid-September. Oil prices dropped for their multi-year highs as the market anticipated that OPEC and Non-OPEC will pump more oil to cover the lost output. Hedge funds are now bearish on oil, as the bet that crude prices will fall reached the highest in six months. The American Petroleum Institute (API) will be reporting the weekly crude oil inventories today.

Major Economic Events

Disclaimer
The prices and news mentioned in this outlook are absolutely no guarantee of future market performance and do not represent the view of ICM Capital Limited. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades.