The positive start to the quarter that we saw in Asia Pacific markets came to an abrupt end when US ISM manufacturing PMI came in well below expectations and just above 50 creating another bout of concern about the health of the US economy in September. US stocks and USD fell sharply on the news and then stabilized at a lower level through much of the rest of the US trading day but managed to claw back their losses in late trading and finished the day with the NASDAQ and S&P in the green and the Dow only slightly in the red. Crude oil also gave back significant early gains to finish in the red. This clear initial reaction to weak news indicates that traders continue to react negatively to news that could be read as FOMC dovish or would suggest interest rate liftoff could be delayed past the end of this month. Over the last 24 hours, we’ve seen a ton of manufacturing PMI reports from around the world, giving an early indication of economic conditions in September. Some of the key takeaways for trading include: China’s economy remains sluggish but it is NOT going off a cliff as had been feared during the summer stock market plunge Commodity sensitive economies are starting to rebound. Both Australia and Norway showed improvement although Sweden remained soft. Greece is starting to bounce back from its summer turmoil but still has a long way to go in its turnaround. UK was a bit stronger than expected, Germany a bit weaker than expected. Germany’s Dax index performed the worst of the major world indices today, losing 1.5% about double the loss of the Dow. The IMF has been saying for a while it wants a cut to Greece’s debt in order to participate in new aid. Today it put a price on its participation of €100B, which probably didn’t help sentiment toward Germany who has been opposed to more debt haircuts for Greece. Brent crude outpaced WTI to the downside suggesting that between a possible renewed dustup over Greece, the migrant crisis, and upcoming elections in Spain and Portugal, the Eurozone could be in for more turmoil which could hold its economy back and crimp resource demand. The blow to US markets may have been cushioned over the day as construction spending beat expectations and auto sales had a banner month led by Ford with an 18.1% increase over year and Chrysler with a 14% rise. This may also have helped markets to claw back much of their losses in an afternoon rebound. The next big report out of the US is the headliner of the week, nonfarm payrolls. ADP payrolls were better than expected and weekly jobless claims have remained below 200K. Still with the late long weekend, I think the number could be a bit on the soft side. I’m thinking 190K with a 10K upward revision to the previous month. Traders approaching the release should note that recent comments from FOMC members indicate that the central bank remains on track to raise interest rates this year. They don’t need a really good number to justify a move, but a really bad number (say below 100K) could force them to reconsider. Keep an eye on average hourly earnings as well. Wage inflation is stickier than headline inflation and has been running above the Fed’s 2% target for some time. Friday’s round of FOMC speeches could also spark another round of interest rate speculation. FOMC Vice Chair Fisher makes his first major public appearance since the last FOMC meeting and the Jackson Hole conference. Fed watchers may be looking to see if he keeps to the party line of a potential rate hike this year and October being live or if this week’s mixed data has encouraged him to change tune. Also of interest is the speech from new Philadelphia Fed President Harker who doesn’t vote for a couple of years, but his predecessor was one of the most hawkish members and traders may be wondering if that will continue or if he has a different approach. Although commodity trading and economic news has been mixed, there has been renewed interest in resource currencies, particularly NOK and CAD (even despite with a weak Canada PMI) suggesting that some of the recent selloffs may have been overdone. Mainland China markets remain closed for holidays, but Hong Kong returns to trading today and its reaction to the China PMI reports could set the tone for trading across the region today, along with NZD commodity inflation, Japan employment and Australia retail sales. Singapore could see some softness after PMI came in below expectations overnight. Action in copper, the S&P/ASX, AUD and NZD may also give an indication of traders’ appetite for risk heading into the big US news and the weekend. Corporate News There have been no major announcements after the US close today. Economic News Significant announcements released overnight include: US jobless claims 277K vs street 271K US construction spending 0.7% vs street 0.5% US natural gas 98 BCF vs street 101 BCF Manufacturing PMI reports: Singapore 48.6 vs street 49.4 Singapore electronics sector 48.5 vs street 48.8 US ISM 50.2 vs street 50.6 and previous 51.1 US Markit 53.1 vs street 53.0 Canada 48.6 vs previous 49.4 France 50.6 vs street 50.4 Germany 52.3 vs street 52.5 Greece 43.3 vs previous 39.1 Eurozone 52.0 as expected UK 51.5 vs street 51.3 Sweden 53.3 vs street 54.0 Poland 50.9 vs street 52.3 Norway 47.3 vs street 44.0 Spain 51.7 vs street 52.9 Italy 52.7 vs street 53.4 Upcoming significant announcements include: 9:30 am AEST Japan unemployment rate street 3.3% 10:00 am AEST NA ANZ commodity prices previous (5.2%) 11:30 am AEST Australia retail sales street 0.4% 11:30 am AEST ECB Draghi speaking 8:00 am BST Spain unemployment change street 21K 9:00 am BST Norway unemployment rate street 2.9% 9:30 am BST UK construction PMI street 57.5 10:00 am BST Eurozone producer prices street (2.4%) 8:30 am EDT US nonfarm payrolls street 201K vs previous 173K 8:30 am EDT US private payrolls street 197K vs previous 140K 8:30 am EDT US unemployment rate street 5.1% 8:30 am EDT US hourly earnings street 2.4% 8:45 am EDT FOMC Harker speaking 10:00 am EDT US factory orders street (1.2%) 12:30 am EDT FOMC Bullard speaking 1:00 pm EDT US Baker Hughes drill rig count previous 838 1:30 pm EDT FOMC Vice Chair Fischer speaking CMC Markets is an execution only service provider. 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Big swings for stocks follow US PMI miss; Nonfarm payrolls preview
20:00, 30 September 2015