Resource related markets stole the spotlight back today. The September gasoline contract spiked another 10% through $2.00/gallon on reports that refined product pipelines from the Gulf Coast to the Northeast were getting shut in due to a lack of supply to carry. Crude oil broke out of its doldrums as well today gaining 2.8%.
Meanwhile, the rally in the US Dollar came to an abrupt end after US Treasury Secretary Mnuchin tried to talk the dollar down noting that a lower US Dollar is good for US trade. This sparked a rebound in gold up off of $1,300 back toward $1,320 and enabled EUR and GBP to cut early losses.
The biggest beneficiaries of this news have been resource currencies, AUD and NZD both turned back upward but the top gainer has been CAD. In addition to boosts from higher oil and lower USD, the Loonie took flight on a spectacular Canadian Q2 GDP report that saw the economy grow by 4.5% way above the 3.7% the street was expecting. This news opened the door to a potential second Bank of Canada rate hike this year. While this could come as soon as next week’s meeting it’s more likely that Governor Poloz may use the statement to signal another hike coming at an upcoming meeting.
US stock markets traded slightly higher on the day but struggled to make much headway as the Dow was unable to regain 22,000 and the NASDAQ 100 was unable to break through 6,000. Tomorrow brings the big nonfarm payrolls report. A spectacular ADP report on Wednesday suggests a robust job market in the US and the potential for a nonfarm beat as well. The street is at 180K down from 209K last month, I am thinking 225K. US manufacturing PMI is due later Friday morning. Chicago PMI came in slightly above expectations so we could see a positive national report as well.
Traders may try to make a play on positive news speculating that the Fed could start to normalize its balance sheet at the September meeting. I still consider this unlikely with the government facing a potential shutdown in October unless it can get the budget, debt ceiling and disaster relief sorted out in the next few weeks.
Today’s Asia Pacific trading may be influenced by the commodity price action with the potential for action in energy stocks and resource currencies. Indices may be impacted by Manufacturing PMI reports. New Zealand may be active as traders continue to digest the recent election poll showing Labour taking a 43%-41% lead over the National Party.
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