U.S. markets started the week off strong following the impact of hurricane Irma being smaller than initially feared. Of course, the damage is still extensive and could effect GDP by as much as 1.5% but the rebuilding process should make up for it in the quarters ahead.
The gains were led by Financial, Materials and Technology with all sectors closing the day in positive territory.
Global Economy – European markets posted strong gains after a less painful weekend than feared along with possible new sanctions for North Korea. The DAX 30 surged 1.4% and
France’s CAC 40 index rallied 1.2%. The Belgium20 and the Stoxx Europe 600 advanced 1% while the FTSE 100 gained 0.5%.
Industrial production expanded to 104 in August and was slightly less than the 105 print in July. The sentiment indicators in services and construction improved by one point to 100 and 103 respectively.
As a result, the Bank of France said the French economy will grow 0.5% in the third quarter from the second, sustaining the pace of the first six months of the year.
ECB Executive Board member Benoit Coeure warned that strength in the euro could depress inflation unless it’s offset by a strengthening economy. He said exogenous shocks to the exchange rate, if persistent, can lead to an unwarranted tightening of financial conditions with undesirable consequences for the inflation outlook.
Asian markets traded higher with North Korean tensions easing after the country did not conduct a missile test over the weekend. Japan’s Nikkei surged 1.4% and
Hong Kong’s Hang Seng Index climbed 1%. Australia’s S&P/ASX 200 and South Korea’s Kospi added 0.7% while China’s Shanghai index was higher by 0.4%.
China August CPI rose 1.8% year-over-year, stronger than expectations of 1.6% and the fastest pace of increase in 7 months. August PPI rose 6.3% year-over-year, stronger than expectations of 5.7%.
There was no major economic data reported on Monday in the US.
Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) pulled back for the second-straight session with the low reaching $127.26.
Backup support at $127-$126.50 held with a move below the latter likely leading to a continued backtest to $125.25-$125 and the 50-day moving average. Resistance is at $127.75-$128.25.
Market Analysis- The Spiders Dow Jones Industrial Average ETF (DIA) is trying to breakout above the top of its recent trading range with today’s high reaching $220.88.
Continued closes above the $220 level would be a bullish development for a continued run towards resistance at $222-$224. The early August all-time high is at $221.68. Fresh support is at $220-$219.50.
The Financial Select Sector Spiders (XLF) tested the 200-day moving average last Thursday and a level that had been holding since June 2016. Friday’s nearly 1% rebound was followed up with today’s 1.7% pop.
Continued closes above resistance at $24.50-$24.75 would be a slightly bullish development. A move back below $24-$23.75 would be a bearish signal for a continued backtest towards $23-$22.75.
All the best,
Roger Scott