The NY session was not kind to the US dollar, which saw most of its overnight gains evaporate. Equities started the session lower and the US factory orders report provided little solace. While the headline number surprised to the upside with a 0.9% MoM print, the core orders number (nondefense capital goods ex aircraft) was revised lower to a 1.8% monthly gain from a 2.0% increase flashed by the durable goods report last week. This feeds directly into GDP on the capital spending front and suggests a slight markdown in 4Q expectations.
Stocks eventually rallied as auto sales in the US came in stronger than expected at a 10.5 million annual rate and up from 9.2 last month. Fleet sales accounted for a large portion of sales (30% in some cases) and so we should take this number with a grain of salt. Earnings reports, meanwhile, continue to look lackluster. While the bottom line has surprised by 15%, sales continue to show about a -1% disappointment – 72% of companies have reported.
Gold was the story of the session as the precious metal continued to ride the positive news that India bought 200 metric tons from the IMF. Momentum names were said to have been buyers through $1065 and then again through $1075 while the macro community was also participating from the long side. The upside remains intact while above the $1083 daily trendline and we would not be surprised to see a move towards $1100 in the short-term.
Seasonal trends continue to favor gold in and over the past 19 years gold has rallied an average 3.5% from early November through the end of the year. This seasonal pattern is clearly on the side of the bulls. That we did not see the usual October downturn makes the case for higher gold into year-end even stronger. The seasonal trend points to a year-end target of roughly $1150 for the precious metal.
The price action in currencies was not surprisingly USD negative. EUR/USD jumped from an open near 1.4650/55 into the 1.4730/35 area as we write. USD/CAD meanwhile absolutely collapsed from 1.0800 into the 1.0660 zone. The rally in the commodity complex certainly helping matters there. USD/JPY was one small bright spot for the buck and the pair continued to follow US yields – rising from 90.15 towards the 90.35 area.
