Equities Lead Charge As All Risk Is On For The Day

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Equities Lead Charge As All Risk Is On For The Day

The U.S. dollar, which was down against the euro, tried to give gold a hand but regular traders were intent on pushing the yellow metal down. Platinum and palladium suffered likewise but silver was up on the day about half a percentage point.

The risk-on sentiment bled over to the yen, which was off against the greenback. The yen is one of a handful of safe haven currencies.

But it was trading lower not on its usual strengths and weaknesses but because there is concern the dollar will jump should the Fed initiate a new interest rate hike. (By comparison, the dollar was off against the Swiss franc, another haven currency.)

The yield on the 10-year U.S. bond rose, again an indication that risk sentiment was soft in the markets.

Stocks were up on practically all indexes, except Shanghai. Asia was reacting belatedly to U.S. housing data (discussed fully in yesterday’s letter). Hog Kong soared 2.70% on the day.

Europe, too, was surfing on American strength. However, Europe’s banking sector and higher oil prices helped push the three main indexes up. The banking sector liked the short-term fix for Greece lingering debt problems. (A mini bailout.)

West Texas Intermediate prices moved closer to $50 a barrel today, driven by data from the U.S. Energy Information Agency, which reported that U.S. crude stockpiles had fallen by 4.2 million barrels in the previous week.

Energy was the leader of the pack in U.S. equities today, as well, though materials, tech, medical and transportation were strong.

For the doubters about the potential Fed interest rate move up, the Markit Flash U.S. services PMI for May was 51.2, down from 52.8 in April and well below the long-run survey average of 55.6, Markit said.

The long holiday weekend in the U.S. will give everyone an opportunity to reassess positions and investing strategies.

Of interest, the VIX has pulled back dramatically, below 14. A week ago, the volatility measure looked as if it were headed to 17 and higher. It’s amazing what short covering rallies can do for uneasiness. 

Wishing you as always, good trading,

Gary Wagner