Week Starts Directionless with Some Uptick In Gold

Markets got off to a shaky start Monday with no financial instrument really holding sway – at least not on the positive side.

It is hard to discern whether this is just a case of Monday blahs exacerbated August vacation schedules or a reaction to collapsing oil prices.

We are also eagerly awaiting the July labor report due out this Friday. More on that as the week progresses.

West Texas Intermediate crude is sitting right at the $40 per barrel mark (having settled down 3.85%) and, from a fundamental point of view, it is poised to go lower unless some huge external event changes the commodity’s direction.

Significantly, gold moved forward even in the face of a stronger U.S. dollar. In fact, the entire precious metals complex is up, with palladium holding at a thirteen-month high in mid-afternoon trading. 

It’s no surprise the dollar tried to make headway after last week’s 2.00% stumble against the usual basket of currencies.

Disappointing U.S. growth data released at the end of last week dragged the dollar down and many traders have been thinking the greenback was oversold, especially against the yen.

"The [GDP] data dented the dollar's previously positive tone, which was the result of an otherwise positive run of economic reports over recent weeks," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

Conservative dollar analysts think there might be more room for the dollar to weaken, given the interest rate climate. Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington noted, too, that the dollar's decline on Friday followed five consecutive weeks of gains, "which arguably made it somewhat ripe for a pullback."

With that in mind, we should note that the dollar did pare Monday's gains after data showed that the U.S. economy's manufacturing sector in July expanded at a slower pace than in the previous month and less than expectation.

The 10-year bond yield hovered in place, right around 1.50%. The 30-year rate fell even more, or about double.

In Asia, equities were mostly higher with Hong Kong leading the way, followed by smaller gains in Tokyo. Shanghai, however was off almost 1.00%.

Europe was down across the board as exposure to bank stress tests is causing financial stocks to get woozy. Energy also hurt the DAX, CAC and FTSE. Just from general sniffing around, we don’t think the Brexit fallout is done. We think people have just been whistling past the graveyard.

The S&P hit a new intraday high but could not hold it as energy and general uncertainty weighed. The Dow was weaker, as well. The NASDAQ found strength through market movers like Apple, which was up about a point and a half. Once again the company shows its resilience.

Wishing you as always, good trading,