Dollar Mixed, Gold Hits 5-Year Low

 
Snapshot: 

        -Dollar mixed; 10-year U.S. Treasury yield at 2.375%; U.S. stock futures higher; Nymex at $51.00; gold at $1115.30
        -Watch for: Canada May wholesale trade, earnings from Morgan Stanley, Halliburton, IBM
        News: Greek Banks Reopen With Restrictions; German Economic Growth Likely Picked Up, Says Bundesbank; U.S. Seeks to Allay Allies' Concerns on Iran
        The dollar continued to charge higher against the majors in Asia Monday, still driven by last week's comments from Federal Reserve chief Janet Yellen that an interest rate increase this year might be appropriate.
        If interest rates rise, it will become less attractive to be short on the dollar versus high-yielding emerging market currencies, and this could prompt short-covering.
        The euro made modest gains in European trade with sentiment soothed somewhat after Germany's parliament backed a rescue for Greece and eurozone officials completed plans to provide the country with EUR7 billion of bridge financing.
        At 4.50am ET, USD/JPY was at 124.28-29 and EUR/USD was at 1.0846-49.
        Friday's upbeat housing data and the rise in headline CPI, coupled with a steady, data-dependent message from Janet Yellen led the market to price a more meaningful risk of a September Fed rate hike, noted Morgan Stanley.
        At 4.33am ET, with short-end bonds more vulnerable to rising interest rates, the two-year Treasury was yielding a two-week high of 0.698% while the 10-year was stable at 2.375%, according to data supplied by CQG.
        In European debt markets, the yield on German 10-year government bonds was little changed at 0.74%. The yield on 10-year Italian bonds was at 1.88% and on 10-year Spanish bonds was at 1.89%, both slightly lower on the day.
        Wall Street looked poised to add to last week's record-setting gains, as U.S. stock futures signaled a step up at the open.
        Strong earnings reports from tech companies and optimism about Greece's crisis have boosted the stock market, and more quarterly results are due out Monday from the likes of Morgan Stanley and IBM.
        S&P 500 futures were last up 3.45 points, or 0.2%, while those for the Dow edged up 37 points, or 0.2%. Nasdaq futures advanced by 6.50 points, or 0.1%.
        What strategists are saying: "This week, the SPX appears likely to consolidate or pull back prior to a breakout to a new all-time high," said Katie Stockton at BTIG.
        She added that it's "encouraging that the tech-heavy NASDAQ 100 Index has already confirmed a breakout to a new multi-year high, setting a good example for the SPX."
        In commodity markets, Brent crude was 0.1% lower on the day at $57.01 per barrel, while Nymex futures were up 11 cents at $51.00.
        Global oil demand has defied even the most optimistic expectations this year, providing crucial support to oil prices," said analysts at Bank of America Merrill Lynch. But the bank attributes this to a response to short-term low prices, rather than a major turnaround in the market's dynamics.
        As the Organization of the Petroleum Exporting Countries continues to pump out more and more oil, "demand may have to work hard to absorb the surpluses, and oil prices could stay low for longer," they said.
        Gold continued to fall, hitting a more than five-year low, though prices partially rebounded from a sharp selloff at the beginning of the Asian session.
        At 4.48am ET, gold was down 1.5%, or $16.60, at $1,115.30 a troy ounce, a level last seen in early 2010.
        "This kind of sharp drop during early Asian hours is a strong indication that a big fund is selling their holdings of gold," said Gnanasekar Thiagarajan at Commtrendz Risk Management.
        Another analyst also suggested the price movement was probably a trading ploy.
        "In our view, today's price action does not seem to be driven by fundamentals. The nature, size and timing of the heavy selling suggests a market participant was taking advantage of low liquidity or some sort of forced selling had taken place," said Victor Thianpiriya at ANZ.
        Greek Banks Reopen With Restrictions
        Greek bank branches reopened their doors after being closed for three weeks to prevent a banking system collapse, but almost all the restrictions on financial transactions remain in place.
        German Economic Growth Likely Picked Up, Says Bundesbank
        Economic growth in Germany, Europe's largest economy, likely picked up in the second quarter, the country's central bank said in a report Monday.
        U.S. Seeks to Allay Allies' Concerns on Iran
        The Obama administration has launched an aggressive campaign to try to allay the fears of allies in the Middle East over the Iran nuclear deal.
        German Producer Prices Ease in June
        Lower energy prices pulled down German factory-gate prices in June, data from the federal statistics office showed Monday.
        Eurozone Current-Account Surplus Narrows
        The eurozone's current account surplus narrowed in May, data from the European Central Bank showed Monday.
        Clinton to Push Revamp of Capital-Gains Tax Rates
        Hillary Clinton will propose a revamp of capital-gains taxes that would hit some short-term investors with higher rates, part of a package of measures designed to prod companies to put more emphasis on long-term growth, a campaign official said.
        Egyptian Army Says It Killed 59 Militants in Sinai Peninsula
        The Egyptian army on Sunday said it killed 59 militants in the Sinai Peninsula a day earlier, while seven soldiers were left dead in military operations against militants in the restive area.
        Write to Sarka Halas at sarka.halas@wsj.com
        (END) Dow Jones Newswires

        July 20, 2015 06:25 ET (10:25 GMT)

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