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US dollar weaker on Fed official's remark

US stocks rallied on Monday after a comment by Federal Reserve Vice Chairman Stanley Fischer that he doesn’t expect the interest rate hike will happen until after inflation climbs closer to the Fed’s target of around 2%. The inflation rate has fallen close to zero in recent months and has been below 2% since April 2012. The dollar weakened, ICE US dollar index, a measure of the dollar’s strength against a basket of six currencies, fell 0.4%. Markets didn’t react to Atlanta Fed President Dennis Lockhart remark later in the day who said the economy is strong enough to handle a gradual rise in interest rates. S&P 500 jumped 1.3%, with all of 10 sectors except utilities closing higher. Precision Castparts' shares jumped 19.1% after Berkshire Hathaway said it would buy the aerospace and engineering company in a deal valuing the company at $32.3 billion. Google gained 4.8% after market close as the company announced it is changing its operating structure by setting up a new company called Alphabet Inc, which will include the search business and a number of other units. Twitter shares surged 9.1% after CEO Jack Dorsey bought more shares joining other insiders, and the company also reached a multiyear partnership agreement with the National Football League. Today at 13:30 CET second quarter unit labor cost will be released in US. The tentative outlook is negative for the dollar. At 15:00 CET second quarter wholesale inventories will be released. The tentative outlook is positive.

Greece today reached a deal with the European Commission, the European Central Bank, the International Monetary Fund and the European Stability Mechanism on a bailout loan that would release as much as 86 billion euros. European stocks advanced on Monday as investor sentiment was buoyed by rising mining shares as dollar weakened and optimism over Greek bailout negotiations. The euro strengthened. The Stoxx Europe 600 finished up 0.7%. Mining shares rebounded after Friday’s fall following weak Chinese data indicating exports in July fell 8.3% from a year earlier and imports dropped 8.1%. Today at 10:00 CET July ZEW survey results for Germany and euro-zone will come out. The tentative outlook is positive for euro.

Nikkei fell 0.4% today as investors took profits on recent outperformers including drugmakers and food companies after the Chinese central bank devalued the yuan. Tomorrow at 00:50 CET Bank of Japan July 14-15 meeting minutes will be released. At 06:30 CET June industrial production and tertiary industry activity index will be published. The tentative outlook is positive.

The People’s Bank of China devalued yuan today 1.9% against the dollar. The central bank manages the exchange rate through an official midpoint, allowing it to move 2% above or below that midpoint each day, which is called the daily fixing. Today the regulator said it will now base the midpoint on market makers' quotes and the previous day's closing price.

Oil prices are falling today after jumping almost 4% on Monday as investors are concerned slowing Chinese economy, evidenced by more than 8% fall in July exports, will slow the demand growth for crude oil while output from major producers is near record highs.

Copper is falling today after rebounding from a six-year low on Monday after rains in Chile halted work at Codelco, world’s largest copper-mining company.



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