Tuesday has been a busy one for risk associated assets and, with a negative tone to the markets, stocks, bond yields and the oil price are all sharply lower while Gold, the Jpy and the Chf are all in demand. The US$ index is a little lower (-0.25%) but the action has been elsewhere.
Brexit issues led things off in the European session, where Sterling was underpinned after the UK Supreme Court ruled that Prime Minister Boris Johnson’s move to shut down the parliament was unlawful, meaning that the uncertainty will continue as we head towards the Brexit divorce date of 31 October.
The main event of the session though came with news that a formal impeachment inquiry will be started against President Trump, with the calls for an inquiry increasing after news that Trump may have sought foreign help in smearing political rival and presidential candidate, Joe Biden.
Amongst all this, Donald Trump found time to berate China’s trade practices at the United Nations General Assembly, saying he would not accept a “bad deal” in U.S.-China trade negotiations, which has not helped the outlook for the upcoming resumption of the negotiations.
Also not helping stocks was a disappointing Richmond Fed Index and Consumer Confidence result from the US, which underscored concerns over the economic impact of a prolonged U.S.-China trade war. The Consumer Confidence reading fell to 125.1 from a downwardly revised 134.2 in August, well below expectations of 133.5, while the Richmond Fed Manufacturing Index for September came in at -9 vs. a +1 estimate.
In other news, the German IFO Business Climate rose to 94.6 in September, up from 94.3 and beat expectation of 94.5. The expectation Index dropped to 90.8, down from 91.3, missed expectations of 91.9 while the Current Assessment Index rose to 98.5, up from 97.3 and beat expectation of 97.0. IFO noted that “the downturn is taking a breather” but “outlook for the coming months has deteriorated again”, which ensured that the Euro remained trapped on the topside.
In Australia, the RBA Governor left open the possibility of a rate cut at next week’s RBA Meeting noting that “at the Board meeting next week, we will again take stock of the evidence”. He added that “the Board is prepared to ease monetary policy further if needed to support sustainable growth in the economy, make further progress towards full employment, and achieve the inflation target over time.” The Aud remains capped at 0.6800.
Wednesday will be rather thin for data, and politics will undoubtedly rule the agenda, although the NZ Trade Balance (exp $-4.86bio) and the RBNZ Interest Rate Decision are both due. The RBNZ cut by 50bp last month and are probably on hold today although they like to be ahead of the curve, so another cut cannot be ruled out, which would add to the downside pressure on the Kiwi. The Kiwi does not seem to think this is likely and had another decent rally on Tuesday. The BOJ Minutes are also due, which may create some waves for the Jpy pairs, but apart from that there is very little that is likely to move markets. The US New Home Sales and the EIA Crude Oil Stocks Weekly Change are due late in the session but that is about it. Have a good day.
Economic data highlights will include:
Wed: NZ Trade Balance, RBNZ Meeting/Interest Rate Decision, BOJ Minutes, ECB Non-Monetary Policy Meeting, Speech: ECB’s Coeure, SNB Quarterly Bulletin, US New Home Sales, EIA Crude Oil Stocks Weekly Change
Market moves, in brief:
FX: DXY 98.34 (-0.28%)
Bonds: US10Y; 1.654% (-4.33%), German 10Y; -0.603% (-3.92%), UK 10Y; 0.450% (-4.82%), Australian 10Y; 0.972% (-3.67%), NZ 10Y; 1.143% (+0.40 %), China 10Y; 3.118% (+0.43%)
Stock Indices: DJI; -0.53%, S+P; -0.84%, NASDAQ; -1.46%, EUStoxx50; -0.14%, FTSE100; -0.47%, Shanghai Composite; +0.28%,
Metals: Gold $1531 oz (+0.60%), Silver $18.60 oz (-0.23%), Copper $2.603 lb (-0.33%), Iron Ore $93.21 per tonne (NYMEX) (-0.30%),
Oil: WTI $56.80 pb (-2.70%)
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