There is a mildly positive tone to risk appetite today through major markets, but it is also interesting to see the dollar also holding strength. With Treasury yields ticking higher and a “bull steepening” on the yield curve developing (longer dated yields rising faster than shorter dated), the dollar is beginning to look primed for recovery. Although it had roots in extremely oversold positioning and a better than expected payrolls report on Friday, there does not seem to be too much to drive which is driving the move today. Notably the tit-for-tat deterioration in diplomatic relations between the US and China continues, as both put sanctions on individuals, leaving questions over the trade talks which are scheduled for the this week. Despite this, the risk positive tone is supporting equity markets, but along with support for the dollar, we are finally seeing gold beginning to correct. The yellow metal is back under $2000 this morning. Also silver (which should be renamed “gold on steroids”) is turning sharply lower. Sterling traders will be watching the reaction to UK unemployment which was announced early today and broadly came in better than expected for the June data, although the July claimant count was higher than expected.
Wall Street closed mixed last night. The Dow closed decisively higher, but after days of huge tech gains, a degree of profit taking hit the sector, dragging the NASDAQ lower, and weighed on the S&P 500 (+0.3% at 3360). Despite this, the mildly positive tone to risk is helping US futures slightly higher today (E-mini S&Ps +0.1%). Asian markets were positive overnight with the Nikkei +1.9% after returning from public holiday on Monday, whilst the Shanghai Composite was -1.1%. European markets look set fair, with FTSE futures c. +1% and DAX futures +1%. In the forex majors, the risk positive vibe is resulting in the USD just pulling back slightly after a couple of days of recovery, and JPY underperformance. In commodities, gold is over -1% lower, whilst silver is -3%. Oil is mixed although supported by the risk positive bias and news of Iraq looking to improve its compliance with OPEC+ production cuts.
On the economic calendar, euro traders will be looking out for the German ZEW Economic Sentiment at 1000BST which will given further indication of how the German economy is re-emerging from the pandemic. Consensus is expecting a slight deterioratio