US stocks posted a second session of gains with material related stocks outperforming, boosted by higher commodity prices and strong corporate results. Renewed hopes of US tax reform also played their part after Politico reported President Trump’s top aides and congressional leaders have made significant strides in shaping a tax overhaul. Treasuries ended the session lower, while the US Dollar index closed higher. After some choppy price action in reaction to events at the Sharara oil field in Libya, oil prices settled higher with US crude futures settling at $47.64 (+$0.27). Most recently, field workers said they are working to gradually reopen the field. Oil prices did however pare gains in post-settlement trade after API data showed draw in US crude inventories in line with expectations. Elsewhere, minutes revealed Federal Reserve banks voted unanimously to leave the discount rate unchanged ahead of the July FOMC meeting.
Asian stocks were mixed despite a mostly positive open after the higher close stateside, while markets in Hong Kong were closed for the morning session after Typhoon Hato’s warning was upgraded to 10. During the session, we heard from US President Trump who spoke at a rally in Phoenix, AZ, he said we are building that wall, even if we have to close down government. Trump, speaking on North Korea, stated he respects the fact that Kim Jong-Un is beginning to respect the US and that maybe something positive can come about. On NAFTA, Trump said at some point the US will probably end up terminating NAFTA at some point. Trump’s remarks on a government shutdown over the proposed border wall saw USD/JPY fall to session lows, while gold also popped higher. Data wise, Japan’s preliminary manufacturing PMI for August topped expectations, rising to 52.8 (f/c 52.3). Elsewhere, we saw the release of New Zealand’s pre-election economic and fiscal update which was a mixed a bag. The NZ Treasury slashed its 2017-18 year GDP growth forecast to +3.5% from +3.7% in the budget forecast, while lowering expected future OBEGAL surpluses. They did however, improve their cash balance forecasts. Immediately after the release, NZ Finance Minister Joyce said unless economic conditions are better than anticipated, the government will not consider tax cuts until 2020.
Looking ahead, at 07:00 BST, we get Norwegian unemployment, followed France’s manufacturing and services PMIs, Danish and Turkish consumer confidence at 08:00 BST. Up next at 08:30 BST, we get Germany’s manufacturing and services PMIs, followed by Iceland’s deposit rate, in which rates are expected to be held at +4.5%, at 08:55 BST. Then at 09:00 BST, we get the Euro Zone’s manufacturing and services PMIs and South African CPI. On the auction front, the UK sells £2.75 Bln 2023 bonds and Germany sells €3.0 Bln 0.5% 2027 notes at 10:30 BST. Also of note, ECB President Draghi speaks at 08:00 BST.