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Daily Market Analysis
Mixed Messages

by Sean Coakley | August 24, 2016

Global equity markets are putting in a mixed performance as oil prices slip, and traders re-evaluate the prospects for an earlier than expected rate rise in the United States. With an air of uncertainty returning to markets, bond yields have yet to respond while changing sentiment has the US dollar heading higher against a broad swath of its peers.

As the current session kicked off in Asia the most recent round of greenback strength chipping away at the yen’s ascendance was positive for Japanese stocks as exporters stood to gain from a weaker Japanese currency. The Middle Kingdom did not fare as well, with stocks down while yuan slid lower as the Chinese economy continues to grapple with slower growth.  Looking south, both the Australian and New Zealand dollars slid lower on the back of weaker commodity prices dimming the prospects for any export-led rebounds in economic growth.

While the European session continues, the story remains much the same, with indices across Europe putting in mostly negative performances as traders evaluate the consequences of a powerful earthquake felt in central Italy. With stocks down, the euro followed suit despite better than expected economic growth seen in Germany. Across the channel, the sterling edged out its American and European counterparts despite lower than expected mortgage approvals signalling diminished economic prospects in the post-Brexit United Kingdom.  The European session also saw a surprise decline in the South African rand, with the currency dropping sharply in the wake of reports that police were questioning the South African finance minister.

Ahead of the North American open, futures on the S&P suggest an uninspiring opening with the market malaise seen elsewhere not leaving traders in New York unscathed. Ahead of the open, better than expected performance in the US housing sector has shifted sentiment towards the likely timing of future rate hikes. These shifts have underpinned the broad-based gains in the US dollar seen ahead of Janet Yellen’s widely anticipated speech on Friday. With all eyes on Yellen, the stage is set for considerable reaction depending on the content of her commentary on Friday.

 

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