Gold Rout Continues, GBP Falls, Premium Trades
Gold plunged more than $100 as demand for safe havens eroded on Wednesday. The pound lagged, falling to a one-week low while USD and JPY led. Early in Asia-Pacific trading New Zealand retail sales beat expectations and Steve Jobs resigned from Apple. Premium Trades Below.
Atypical market dynamics prevailed throughout the session as risk currencies slumped despite a rally in stocks and selloff in bonds. The S&P 500 gained 1.3% to 1177.
Precious metals were the major story as gold fell $102, or 5.5%, to $1759 and silver fell 6.2% to $39.71. It was the largest percentage decline in gold since March 2008. The CME hiked gold trading margins by 27% afterhours and many traders (including us) believe the announcement was leaked.
Cable began to slide mid-way through European trading and selling accelerated as last weeks low of 1.6420 gave way. The pair closed on the lows at 1.6360 leaving a negative bias.
EUR/USD was relatively stable spending most of the session above 1.44 despite a run on Greek two-year bonds that pushed yields to 44% because of Finlands threatened bailout non-participation.
Economic data aided broad sentiment as durable goods orders ex-transport rose 0.7% compared to the -0.4% expected. The report was solid and it will add an upward bias to Q2 GDP revisions but seasonal adjustments may have played a part and orders data points to a slowdown. Lately, there has been a disconnect between sentiment data and hard data. The general rule is that sentiment leads and data lags.
The other release that buoyed sentiment was from the CBO which said the US will have $3.487T in deficits over the next 10 years, about $3.3T lower than its previous estimate. The CBO noted that its growth estimates (which include an unrealistic 2.4% rate this year) were made in early July, when the landscape was different. We believe the deficits will be much higher but the CBO has a difficult job at the moment with so much of the political landscape is in flux, including taxes, revenue and spending.
The New Zealand dollar rose in early Asia-Pac trading after retail sales rose 0.9% in Q2 compared to the +0.6% expected. The rise matches the gain in Q1. Core sales climbed 1.4% compared to the +0.7% consensus.
At the same time, Steve Jobs said he could no longer meet his duties and expectations and announced his resignation as CEO. He plans to stay on as Chairman of the Board but the news will likely weigh on Apple shares and the broader market in the day ahead as the co-founder and CEO since 1997 exits.
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