Financial markets are consolidating this morning, with the overnight Asian session failing to mimic the optimism displayed on Wall Street during yesterday’s trading.  Despite a lack of economic news flow from the region, the Yen is displaying some moderate strength against the big dollar, which likely added to the offer tone permeating through Asian equity markets, as the Nikkei finished lower by 0.59%, while the Shanghai Comp was off by 0.99%.
European equities have managed to buck the pessimistic start in Asia, with geopolitical developments helping the major indices levitate into positive territory midway through the session.  The potential for further de-escalation in the Ukrainian-Russian conflict has given a lift to sentiment this morning, as a meeting between Ukraine, Russia, Belarus, and Kazakhstan is set to take place in Belarus today.  While the prospects for a détente between Russia and Europe are positive given the “summit-like†setting of the meeting, this will be the second meeting between Putin and Poroshenko that has been mediated be a president of a third country, so it may be too early to think the goal-line is in sight.  In addition, video has just been released of Russian soldiers captured in Ukraine territory, which could potentially complicate the peace-talk progress in Belarus.  Although the Russian military source has told the media the soldiers surrendered after crossing the border by accident, it will likely not be taken as lightly by Ukrainian political heads.  Meanwhile, the EUR is little changed against the big dollar, continuing to flirt around the 1.32 handle after the US durable goods number helped underpin the consolidative tone in the DXY.
Heading into the North American open, the main economic release was durable goods orders for the month of July, which came in with a whopping 22.6% increase from the previous month, handily beating expectations for a moderate 7.5% increase.  Looking deeper into the report the headline number is a little misleading, with the surge being a result of an air show in the UK where orders for commercial aircraft jumped by 318%.  After parsing out the more volatile transportation orders, the core number edged lower by 0.8%, while the proxy for business investment slumped by 0.5%.  Mitigating the drop in orders for business equipment was the fact that June’s number was revised from 3.3% to 5.4%; so on balance the report was mediocre. Equity futures have shown little reaction to the durable goods print, still pivoting in modestly positive territory as the S&P looks set to make another test of the 2,000 level.  The Loonie has managed to claw back some of yesterday’s losses as yield spreads between US and Canadian debt compress, along with seeing some support for front-month WTI which has brought the light-sweet crude back to the mid-$93/barrel range.  USDCAD is churning in the mid-1.09s, though the pair will likely find some decent USDCAD buying interest around the upward trend-line that is coming in around the low-1.09s.
Looking ahead to the remainder of the session, the reading on consumer confidence from the Conference Board is due out at 10:00EST, with expectations that we see a slight easing from the highest point since October of 2007.  The median analyst forecast is for a print of 89.0, though a larger draw-down from last month’s 90.9 would likely add further pressure on the USD, with bonds continuing to rally.
Further reading:
consumer confidence
Wage growth still an issue for the BoE
