Stocks ended little changed on Thursday as a fall in US jobless claims offset data showing a contraction in manufacturing activity while traders await Fed Chair Jerome Powell’s speech later today for clues on the central bank’s monetary policy. The FX markets were mostly steady as well, although Cable jumped after Angela Merkel said a solution to the Irish border issue could be found before the Oct 31st deadline for Britain to leave the European Union. The metals and oil both lost a little ground, but overall everyone is waiting for the action today. Most traders are on the sidelines because of the possibility of some gapping on Monday, and I would not be too involved today.
In terms of data, the US initial jobless claims dropped to 209k, vs exp. 217k, while the US Mfg PMI headed into contraction territory, coming in at 49.9, below the expectations of 50.5. Earlier in the day, the Eurozone Mfg PMI rose to 47.0 in August, up from 46.5 and beat expectation of 46.2, while the Services PMI rose to 53.4, up from 53.2, beating the expectation of 53.0 and the Composite PMI rose to 51.8, up from 51.5. The German Mfg PMI rose slightly, to 43.6 in August, up from 43.2 and beat expectation of 43.0. The Services PMI dropped to 54.4, down from 54.5, but also beat expectation of 54.0, albeit at a 7-month low, while the Composite PMI improved to 51.4, up from 50.9.
Friday will be all about the headlines coming from Jackson Hole, and in particular from what Fed Chair Jerome Powell has to say. Traders will be looking to see if he sticks to his “mid-cycle adjustment” views or if he will lean more dovish in light of recent market volatility and the increased concerns about an iminent recession. His job has been made ever more difficult because of the constant barrage of derogatory tweets from Donald Trump and should make for an interesting speech at today’s Jackson Hole session. On the whole, it would not surprise if he uses his speech to pave the way for another 25bp rate cut at the September 17/18 meeting while downplaying the need for more drastic measures such as reintroducing QE. Australian interest will peak when RBA Governor Lowe speaks on Sunday, so prepare for some gapping on Monday.
Economic data highlights will include:
Fri: US New Home Sales, Jackson Hole Symposium, Fed’s Chair Powell Speech
Market moves, in brief:
FX: DXY 98.20 (-0.06%)
Bonds: US10Y; 1.615% (+1.41%), German 10Y; -0.642% (+4.85%), UK 10Y; 0.52% (+11.16%), Australian 10Y; 0.921% (-2.22%), NZ 10Y; 1.10% (+2.80 %), China 10Y; 3.057% (+1.45%)
Stock Indices: DJI; +0.19%, S+P; -0.05%, NASDAQ; -0.36%, EUStoxx50; -0.63%, FTSE100; -1.05%, Shanghai Composite; +0.11%,
Metals: Gold $1498 oz (-0.27%), Silver $17.05 oz (-0.41%), Copper $2.5595 lb (-1.01%), Oil: WTI $55.33 pb (-0.95%)
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