Nasdaq Record High

MARKETS

The US dollar benefitted from some short-covering at the start of the new month. As we noted yesterday, July was the worst monthly decline in the dollar for a decade. The dollar strength saw other currencies including the Australian dollar pullback before today’s RBA meeting.

Global stock markets pushed higher in response to well-received global manufacturing data with the Nasdaq Composite touching a fresh record high. The gains were helped along by Microsoft shares amid talk of taking a stake in TikTok, owned by Chinese firm ByteDance. 

Gold and silver prices pulled back from record highs amid the stronger US dollar and as risk sentiment recovered. 
 

GURU WISDOM

“Stock price movements actually begin to reflect new developments before it is generally recognized that they have taken place.” – Arthur Zeikel
 

Nasdaq record 

Exactly two weeks since its last record high intraday record high, the Nasdaq made a new closing high above 10,800. The gains have been helped along by the share price performance of Apple, which is just shy of a $2 trillion valuation. The spike higher in Apple shares has made the company worth more than Saudi Aramco to be the largest company by market cap in the world. 

The other big contributor to Nasdaq gains was Microsoft, which has seen investors cheer a tenuous new attempt to acquire the North American services of TikTok. The Trump Administration has threatened to ban TikTok over national security grounds because of its Chinese ownership. Now in an unusual version of capitalism, the White House appears to be in the middle of a takeover deal.
 

RBA Preview

The Australian dollar was under pressure amid a rising greenback in the lead up to the Reserve Bank of Australia interest rate decision. 

Australian interest rates and QE are likely to remain unchanged. The RBA have said the record low 0.25% interest rate is the lower bound. The quantitative easing program targeting 3-year yields  could be adapted to a more direct version of QE with a fixed amount of bond purchases. But before a tweak of QE is made, we suspect the RBA changes its hawkish tune to a more dovish one at the meeting, setting the stage for extra stimulus if the second wave in Melbourne gets worse.