MARKETS CHEER US-EU TRUCE ON TRADE
Yesterday, after the markets closed, Facebook released its second-quarter earnings. The earnings per share of $1.74 were higher than last year’s $1.32 and the expected $1.72 while the revenues of $13.23 billion were lower than the expected $13.36 billion. The revenue miss coupled with the reduced outlook led to a 20% decline of the stock value. As a response, the Nasdaq futures are trading at $7407, which is almost 2% down.
European stocks traded higher today after the meeting between Donald Trump and EU’s Jean Claude Juncker. The meeting was convened to discuss the ongoing trade dispute between the US and the EU. The conflict started when the Trump administration imposed tariffs on EU’s steel and aluminum. The administration was also planning to impose 25% tariffs on European-manufactured cars. At the end of the summit, the two leaders announced a new cooperation on tariffs to allow the US and the EU to negotiate a comprehensive deal.
Yesterday, important housing data from the US showed that the housing market was slowing. Data from the Commerce Department showed that sales of single-family homes fell to an 8-month low. The data from May was also revised sharply lower, showing a significant slowdown in the housing market. In June, home sales lowered by 5.3% to 631K units which was lower than the expected 661K. Today, the weekly jobs numbers released by the Labor department missed the estimates. The initial jobless claims rose to 217K, which was higher than the expected 215K. Continuing jobless claims rose to 1,745K, which was higher than the expected 1730K. In addition, the durable goods orders rose by 1.0%, which was higher than the expected 3%.
The euro was little changed after the ECB released its interest rates decision. As expected, the bank left the deposit facility rate at minus 0.4%, the marginal lending facility at 0.25%, and the base lending rate at 0.0%. In the accompanying statement, the bank said that it would continue buying $35 billion worth of assets until September and then reduce the size to $15 billion in October and then end the purchases in December. On interest rates, the bank said that they would remain unchanged ‘at least through summer of 2019’.
After yesterday’s meeting between Trump and Juncker, the EUR/USD pair jumped to 1.1743. Today, the pair has fallen slightly and is currently trading at 1.1710. The unchanged language from the ECB – even after the positive economic data from the EU - is an indication that the euro will continue being under pressure against the dollar. Further downward movements will see the pair fall to the important support level of 1.1660 in the short term.
Nasdaq futures fell from the all-time high of $7510 to an intraday low of $7370. The index is now trading at $7400, which is lower than the 50 and 100-day Exponential Moving Averages. The RSI for the index using the 4-hour chart below is at 51. There is a likelihood that the index will continue moving higher as contrarian investors start buying Facebook shares after the dip.
The GBP/USD pair continued the upward momentum started on Friday when the pair started moving up from a multi-monthly low of 1.2955. The pair is now trading at 1.3185, which is close to the highest level since Wednesday last week. This price is above the 50 and 100-day EMA. With no major economic data expected today, the pair is likely to continue the upward momentum as traders wait for the US GDP numbers expected tomorrow. Better-than-expected numbers will likely pull the pair down potentially to the 1.3000 level.