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Market Update – August 2 – U.S. rating downgraded at Fitch


US stock futures fell Tuesday night after Fitch downgraded the US’s long-term rating to AA+ from AAA Tuesday night, citing ”an erosion of governance and expected fiscal deterioration over the next three years”. The agency called out brinksmanship in Washington around debt ceiling negotiations earlier this year. This sparked some risk aversion flows with APAC indices falling led by Japan while JPY is strengthening on safe haven trading even if Bank of Japan has pushed back on speculation its recent policy adjustment marked the start of a tightening cycle. Bonds are lower around the globe with 10Y US back above 4% and 10Y JGB at 0.62%. The negativity in Asia was also fostered by the softening of the manufacturing activity across the ASEAN region that expanded at the slowest pace in 7 months. We saw some weak macro data in the US yesterday (ISM, Jolts Jobs Openings) and particularly eye-catching has been the Crude Oil inventory data which pointed to a record weekly drawdown (-15.4M) and helped Crude to climb above $82. Earnings season is more than halfway over with results coming in stronger than expected. Of the S&P 500 companies that have reported, about 82% have posted positive surprises as of last night.

US Debt to GDP ratio
  • FX – JPY is the best performing major this morning, USDJPY0.45% to 142.68, EURUSD +0.04% at 1.0989. All other currencies are down vs the USD with antipodean leading the losses, AUDUSD0.56% at 0.6577, NZDUSD -0.74% at 0.6104. USDIndex just shy of 102.
  • Stocks – Futures are negative this morning: US500 -0.49%, US100 -0.78%, GER40 -1.17%. Asia fell led by NIKKEI -2.44%, HK – 2.23%. AMD rose 2% after market after reporting better-than-expected quarterly results.
  • Commodities – USOil regains $82, $82.17 now. Copper clearly lost $400 ($389 now), Agriculturals trade up with conviction.
  • Gold – stuck at $1949 this morning, XAG at $24.32.

Today: US ADP National Employment. EARNINGS: PayPal, Qualcomm.

Biggest Mover: (@6:30 GMT) JPN225 (-2.42%) trading at 32590 and just in contact with its 50d MA. RSI negatively sloped at 48.36, 5 month trendline awaits at 32k this morning.

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Marco Turatti

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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Marco Turatti – Market Analyst

After working for about 10 years in institutional trading rooms across Europe, Marco entered the FX sector as an analyst leveraging his knowledge of the financial markets. With a degree in Economics, from 2007 onwards he has constantly -and sometimes obsessively- studied and improved his trading and risk management techniques through active and direct investments.

He is a firm believer in the need to know completely the securities one is dealing with, to always have a plan B ready, to build a macro view from which to derive the micro plan of action and -above all- to be strict with the rules one has set oneself, without taking anything personally.

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