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Market Overview :  US dollar weaker ahead of FOMC meeting

US stocks fell on Monday as steep declines in Chinese stocks undermined investor confidence. S&P 500 closed 0.6% lower at 2,067.64, with nine of its 10 main sectors finishing in the red zone, led by a 1.35% fall in the energy index. The dollar weakened, with ICE US dollar index, a measure of dollar’s strength against a basket of six currencies, down 0.75%. The market reaction to better-than-expected US durable goods report was muted. June durable-goods orders rose 3.4%, exceeding expectations, but business investments and shipments remained soft. Investors will be watching closely for the outcome of the Federal Reserve two-day policy meeting, which starts today, for an update on US economy performance and cues on timing of the interest rate hike. As US companies report second quarter earnings, analysts have scaled back expectations of losses in earnings and revenues, and expect earnings of S&P 500 companies to decline 0.3% and revenues to fall 3.9%. This could further prop up stock valuations. The S&P 500 is currently trading near 16.9 times forward 12-month earnings, above the 10-year median of 14.7 times. Today at 14:00 CET May Case-Shiller Composite Index will be published. The tentative outlook is positive. At 14:45 Markit preliminary Services and composite PMIs for July will be published, the outlook is neutral. And at 15:00 CET Richmond Fed preliminary Manufacturing Index and Conference Board Consumer Confidence Index for July will be released. The tentative outlook is negative.

European stocks retreated on Monday after Chinese markets slumped. The euro strengthened to two-week high, boosted by strong German economic data and haven demand. The Stoxx Europe 600 fell 2.2%, Germany’s DAX 30 and France’s CAC 40 lost 2.6% each. Sectors which rely heavily on export to China such as autos, basic resources, energy and industrial goods sectors, fell between 1.3 and 2.8 percent. Today at 09:30 CET second quarter preliminary GDP will be released in UK. The tentative outlook is positive. No important economic data are expected today in euro-zone. Tomorrow at 7:00 CET July Gfk German Consumer Confidence index will be published. The tentative outlook is neutral.

Nikkei closed 0.1% lower today as yen strengthened on safe haven demand and investors worried about the negative impact of the weaker Chinese economy on demand for Japanese exports. Tomorrow at 00:50 CET June retail trade will be released in Japan. The tentative outlook is negative.

Chinese stocks were lower today after plunging more than 8% on Monday, the biggest fall in eight years. The People's Bank of China said today it would inject 50 billion yuan ($8.05 billion) in its biggest liquidity boost since July 7, near the trough of the last market sell-off. The central bank said also it will use various monetary tools to support liquidity further, in line with analyst’s expectations of more monetary easing.

Oil prices continue sliding today after closing at lowest level since mid-March on Monday on concerns about lower demand from China. Investors were concerned also about exacerbating oversupply after data released Friday from Baker Hughes oil-service company showed the number of oil-drilling rigs in the US increased by 21 in the latest week, the largest gain since February 2014.

Copper is edging up today after it slid to the lowest level in six years on Monday as the selloff in Chinese equities spurred concerns demand from metal’s biggest consumer will fall.

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