US MARKET WRAP – Cohn Rumours & Barcelona Attack Crowd Out Risk

The solidarity of US President Donald Trump’s inner circle came into question for a second consecutive day, quashing risk appetite. Rumours did the rounds that Gary Cohn, Trump’s chief economic advisor, was to step down, which was subsequently denied by sources and then the White House itself. Risk appetite saw a brief and modest recovery before fresh flows appeared, with further weight added as a terrorist attack occurred in Barcelona. Fed voters Kashkari and Kaplan stuck to script, both OK’ing an announcement on balance sheet normalisation, but erring on the side of caution, stressing that the Fed should wait and see regarding its next rate hike.

In terms of the larger US equity names, both Walmart and Cisco (two Dow Jones components) traded lower in the wake of their respective quarterly earnings releases. US indices ended the day lower, with the IT sector leading the way. The S&P 500 closed down 1.54% at 2,430.05, the NASDAQ closed down 2.05% at 5,796.32 and the Dow closed down 1.24% at 21,750.94.

The USD eeked out minimal gains with the DXY edging higher. The main story in the currency space came via the ECB’s meeting minutes, which revealed that the central bank’s governing council had expressed concerns about possible market overshooting regarding the EUR. Elsewhere GBP came under pressure after UK retail sales data saw lower revisions for the prior readings, despite headline beats in the most up to date releases. The JPY and CHF closed out on their strongest levels vs. the USD on the back of safe-haven flow.

The treasury space followed suit, as Sep’17 10y T-note futures settled at 126.23, up 6+ ticks.

Oil managed to post gains despite the risk off tone, as Genscape Cushing data pointed to draws in inventory levels. It is also worth noting that September WTI options went off the board today. When all was said and done WTI settled at USD 47.09/bbl, up USD 0.31.

17 Aug 2017 - 21:00- Fixed IncomeData- Source: RANsquawk