Asian equities shrug off geopolitical tensions

Tuesday, July 22, 2014

Wall Street struggled to find firm support around current levels at the start of the week as the lack of macro data on Monday left investors struggling to find a reason for a move higher. Both the S&P 500 and DJIA posted modest losses throughout the day as tensions between the US and Russia crimped risk appetite, keeping the majority of investors side-lined. Trading levels are expected to pick up today as the release of inflation data and existing home sales figures for June as well as the Richmond Fed manufacturing index for July will ensure market participants remain engaged. The dollar index held firm above 80.50 after intraday dips early on in the session yesterday and trade this morning has seen the index push higher, towards 80.590.

In contrast to the US session, Asian equities were more bullish as Japanese markets reopened after the long weekend. Benchmark indices in Tokyo, Hong Kong and Shanghai traded higher overnight on increasing growth optimism in the region in the run up to HSBC’s preliminary July manufacturing PMI reading for China, expected on Thursday. Despite the cautious risk climate given tensions between Russia and the West, speculation among Chinese investors that the government would embark on a fresh round of stimulus supported both H-shares and mainland stocks higher.

Three month aluminium prices traded on the LME rallied to their highest level in 16 months, trading above $2,020/tonne yesterday as speculation regarding tightening fundamentals supported levels higher. Prices rallied 1.8% higher yesterday as warehouse inventories continued to decline, reaching their lowest levels in almost two years. LME approved warehouse stocks have decreased by 9.4% since the start of the year as weaker global prices forced producers to shutter excess capacity in a bid to bring supply and demand back into balance.

DXY steadies above 80.50 ahead of inflation data

DXY Curncy DOLLAR INDEX SPOT 2014 07 22 07 33 58

LME 3-M aluminium prices rally higher on falling inventories

NLSAH Index LME Cls Stck Prim A 2014 07 22 07 26 37


Events for today

0930

UK

Jun

PSNCR & PSNB

1330

US

Jun

CPI

1400

US

May

Monthly Home Prices

1500

US

Jun

Existing Homes Sales

1500

US

Jul

Richmond Fed

Topics: Aluminium, DXY, LME
More from: Kash Kamal