Australian dollar falls as global stocks tank

DXY eased last night as CNY and EUR firmed:

The Australian dollar was down across the board:

Gold jumped:

Oil was bashed again:

Metals are amusing:

Miners were soft:

EM stocks are stalled:

Junk was mixed:

Treasuries big bigly:

Bunds biggerer:

And Aussie bonds:

Stocks were hit as earnings were crapola:

Westpac has the wrap:

Event Wrap

US housing starts fell 0.9% in June, the volatile multi-family segment accounting for all the weakness. More encouragingly single family starts rose 3.5%, though that follows a 5.1% fall in the previous month.

UK June inflation was very much in line with expectations. Headline and core CPI at 2.0%y/y (prior 2.0%y/y) and 1.8%y/y (prior 1.7%) were in line with estimates and the headline remains at the BoE’s target.

Eurozone final headline CPI lifted marginally to +0.2%m/m and 1.3%y/y (initial releases of +0.2%m/m and 1.2%y/y) but the more important core CPI was unchanged at 1.1%y/y.

Event Outlook

Australia: Jun employment is expected to rise 9k and see the unemployment rate hold at 5.2%. Westpac is forecasting a 10k increase in employment but expects the unemployment rate to decline to 5.1% due to a pull-back in the participation rate. Q2 NAB business survey will provide further detail on the monthly read – conditions (+2) and confidence (+3) both below average in Jun.

UK: Jun retail sales are anticipated to decrease 0.3% following a 0.5% decline in May.

USFedspeak involves Bosticin an armchair chart and Williams on monetary policy.

The two day G7 Finance Ministers and Central Bank Governors meeting reaches a conclusion. It is the last meeting to be held before the G7 Summit of heads of state on August 24-26.

Not helping stocks was this:

Trade negotiations between the world’s two largest economies are stalled over disagreements surrounding Chinese tech giant Huawei, The Wall Street Journal reported Wednesday.

Progress on resolving the trade war is stuck in limbo until the White House determines how to address China’s demand to back off restrictions on Huawei, the Journal said, citing people familiar with the talks.

There has been little public progress since President Trump and President Xi Jinping agreed to a truce at the G-20 last month. The issue of intellectual property was a key sticking point at the June international summit, despite Washington and Beijing’s agreement to restart talks. The issue over which semiconductor chips, among other products, can be sold to Huawei without security issues remains a key point of contention, according to the Journal.

But earnings were lousing with BofAML, Netflix and Alcoa all disappointing as falling global growth sucks down US industry:

Killing US investment:

And let me just remind you what will happen if stock prices do follow earnings downwards:

Yeh. That’s a correlation from Hell. While risk off reigns, the Australian dollar falls.

Comments

  1. Except here at MB everyone else was saying how China can play the long game.. It turns MB was right China will lose this trade war in very ugly way. More and more manufacturers are moving to Vietnam and other Asian countries in order to avoid tariffs.
    This also points to the fact that Trump does not give a flying f about US manufactures as he only plans to bring few back but he is simply moving on China to prevent it to become next super power. This is why he has bipartisan support.
    There will be no agreement and this will go full tard. China will have to go through lot of pain to restructure and become like Russia where they don’t need US for anything. Russia has been trying to explain this to China for years by Chinese diplomats, politicians and strategists proved to be peasants in expensive suits continue to think that they can fly under the radar by smiling nice. Impossible to do that in this century.
    And yes few here commented that if Xi was more strategic China could have keep on doing what they were doing for few more years. Answer is simple No. This was coming at them as US was in prep mode for few of years to do this. US recognised Chinese threat few years back and they knew China was getting close to achieve critical mass in technological advances (military wise) and high tech manufacturing so this needed to stop. By the time few politicians and papers started making noise about Chinese threat everything was in place to make the move. Those politicians and commentators were just prepping the public and building patriotic sentiment.

    • Good points.
      China will continue to slide economically with its sky rocketing debt, but the trade dispute with the US won’t help.
      You will be happy that Ray Dalio is plugging gold.

      • Yeah I read that article few hours ago.. and gold price jumps back to all time high for the year. Let’s see if it breaks $1430 and $1450 over the next week or so. If it breaks $1450 then all the way to $1500 is very possible.
        By the time FED cuts second time I think gold will be at $1500.
        If only large US companies continue to report lower earnings over coming days..

    • I would also say they needed an appropriate foghorn in trump to make it plausible. The same strong handedness from an obama would just not be in character. Hillary, maybe also. Trump can sell it as his own strategy as part of America First… what it is actually is China Last.

    • Meh – almost nothing of any significance has moved to China outside of slight shifts in supply chain – so where something was manufactured and assembled in China – its now manufactured in China and assembled in Vietnam (stamps are applied).

  2. DominicMEMBER

    On the stocks front:
    This year more than 80% of all US IPOs have been loss-making companies. The last time loss-making IPOs made up this percentage was, er, just prior to the dot com bust. Tick, tock ..

    Netflix, everyone’s favourite streaming service, has reported subscriber ads that were 50% of the forecast Q2 number. Growth peaking already? Meanwhile, Disney, Apple, NBC, Time Warner, your mother and your mother’s dog are readying competing streaming services. In the meanwhile Netflix are losing key 3rd party content: all Disney-owned content and more recently Friends was pulled. Ouch.

    Tesla, Uber, Lyft, Alibaba, Beyond Meat. Oh dear.

    Time to warm up the popcorn maker

    • The Office was the highest rating show on Netflix which got pulled – no one cares about Friends.

      Streaming saturation is a real thing – it was ALREADY occurring with HBO, Prime, Hulu, Neftlix etc – people were sick of it and had returned to pirating.

      Aggregators are killing it already – there are so many single click install pirate aggregators now that we are spoilt for choice – its just the general public is the last to know about this sort of stuff.

      Right now you can click and install almost ANYTHING – literally sports, AFL, HBO, Fox, Netflix etc – if you know how to plug in a Raspberri Pi then well – you can basically play Asteroid with SpaceX.

      Seriously – all of these guys are pushing everyone into the hands of Chinese developers who just offer what people what – access to Ubiquitous content from a single source at a reasonable price – done – easy – massive popularity.

      The majors are just arguing amongst themselves for the scraps.

      • Sounds good. How do I get involved in this pick ‘n pay content? And how do I install this Raspberri Pi.