The US$, Treasury yields and stockmarkets are all lower on Wednesday following a miss in the US manufacturing data, which contracted for the first time in three years in August, with new orders and hiring declining sharply as trade tensions weighed on business confidence, raising financial market fears of a recession. The Manufacturing ISM index dropped to 49.1 in August from 51.2 in July, the first contraction in activity in 3 years, and ensured that US markets remained under pressure through the session. The other main event of the day was Brexit, where concerns about the political chaos in the UK took another turn as an MP resigned from the Conservative Party and ensured that the UK PM, Boris Johnson, lost his working majority to take the UK out of the EU, with or without a deal. At the time of writing, UK MPs the government have just lost the vote to block no deal and it now looks as though an election is imminent.
The real beneficiaries of the session were the metals where Gold/Silver rallied by 1.1%/3.8% respectively. On the other hand, oil fell by 1.5% after the US data as demand looks likely to diminish in line with slower demand.
In the FX markets, while the US$ is mildly lower, it has mostly maintained its recent gains and the DXY remains above 99.00. The Aud$ has held on above recent lows and recovered a little after the RBA left rates on hold, while the Euro reached a long term technical target and has since seen a mild bounce. Sterling broke below 1.2000 because of the Brexit chaos but then bounced to as high as 1.2100 before settling a little lower at the end of the session.
Looking ahead, Wednesday will see global Services/Composite PMIs, beginning with those for Australia and then heading on to the Caixin China figures ahead of those for the EU and the US. The other major event of the day will be the Australian Q2 GDP (exp 0.5%qq, 1.4%yy), where some analysts are warning of the chances of a negative quarterly figure, which would push the Aud$ sharply lower. Other than that it will be a fairly thin calendar, although note that there is a Band of Canada Interest Rate Decision- at which rates are expected to stay on hold. There are plenty of Fed speakers too, including Bullard, Bowman, Kashkari, Evans and Williams. Have a good day.
Economic data highlights will include:
Wed: Australian CBA/AIG Performance of Services Index, Australian Q2 GDP, Caixin China Services PMI, EU/UK Services PMIs, ECB’s Lane Speech, US Trade Balance, US Composite PMI, Fed Speakers; Bullard, Bowman, Kashkari, Evans and Williams Williams/Bullard/Bowman/Kashkari/Evans
Market moves, in brief:
FX: DXY 99.01 (-0.03%)
Bonds: US10Y; 1.4700% (-2.11%), German 10Y; -0.713% (-1.34%), UK 10Y; 0.342% (-16.75%), Australian 10Y; +0.945% (+5.59%), NZ 10Y; +1.05% (-2.33 %), China 10Y; 3.07% (+0.17%)
Stock Indices: DJI; xxxx%, S+P; xx%, NASDAQ; xxxx%, EUStoxx50; xxxx%, FTSE100; xxxx%, Shanghai Composite; xxxx%,
Metals: Gold $1546 oz (+1.13%), Silver $19.17 oz (+3.81%), Copper $2.5295 lb (+1.2%), Iron Ore $89.55 per tonne (NYMEX) (+5.8%),
Oil: WTI $53.95 pb (-1.53%)
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