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USD continues to rise as Gold drops to 1-month low

Summary:

  • Strong durable goods support latest USD leg higher; Gold drops to 1-month low 
  • US stocks remain close to all-time highs. DE30 hits 3-month high
  • DOE inventories decline for 1st time in 4 weeks
  • Bitcoin moves back above $4000
  • Catalan independence vote threatens to rattle SPA35 

Durable goods orders made an impressive recovery for the month of August after falling sharply back in July by 6.8%. A month-on-month rise of 1.7% is clearly influenced in part by the disastrous prior reading but nonetheless it represents a pick-up and leaves the previous print looking more like an anomaly.  

 The initial market reaction was evident in Gold, with the precious metal falling around half a percent in the minutes following the release. The market dropped to its lowest level in more than a month and whilst it has bounced into the European close it remains below the prior swing level of 1291. 

European stock indices enjoyed a solid day of gains with the DE30 hitting its highest level in 3 months. The SPA35 was the standout performer in rising more than 1.5% but the forthcoming Catalan independence vote could cause some jitters heading into the weekend for Spanish equities. US stocks are little changed at the time of writing with the US30 looking to end a run of 4 consecutive lower closes.

The latest inventory figures from the US department of energy have shown a drop of 1.8M barrels in the past week. This is the first drop in four after three consecutive rises with the damage done to refineries during hurricane Harvey causing a drop in demand. Against consensus forecasts for a rise of 2.9M and a prior print of 4.6M the headline could be seen as supportive for the oil price.  However, the market has dipped back to trade at its lowest level of the day following the announcement as some of the components of the report were negative for price. It should be noted however that the selling has been contained in the immediate reaction. 

Bitcoin has risen back above the $4000 level today in rising by more than 4%. The latest news flow surrounding cryptocurrencies has improved somewhat with MIke Novogratz calling Bitcoin the "biggest bubble ever" but also stating that he is bullish and looking to ride it higher. He is a former macro manager at Fortress Investment Group and has decided to start raising $500 million to forge a hedge fund which will invest in cryptocurrencies, initial coin offerings (ICOs) and other related companies.

The last week of September is full of politics, especially in Europe. Investors have focused on Germany in the aftermath of parliamentary elections but much more important developments are taking place in Spain. Local elections brought nationalist and separatist forced in a region on Catalonia and although this local government enjoys only a slim majority it managed to push the concept of independence vote through a regional parliament. Is SPA35 a bargain or is it at a serious risk of a crash? 

 

 

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