he big selloff to kick off the year which started in China yesterday continued through North American and European trading today. Manufacturing PMI reports were mixed with disappointing results out of the US and UK also dragging on sentiment. The Dax finished down 4.2% while the FTSE fell 2.4%. The Dow finished down about 1.7% having spent much of the day down 2.0% or more suggesting some short covering late in the day.
It’s a quiet day for news in Asia Pacific countries so the big question for trading today is whether the China selloff is done or if we could see another round of selling in markets where trading was halted yesterday? Whether yesterday’s debacle turns out to be the start of another panic slide like the one we saw last summer or a washout before a bounce could also have an impact on trading in copper, crude oil, plus China sensitive stocks and currencies in Australia and elsewhere. It also will be interesting to see if the flight to defensive havens that started in JPY yesterday and moved into gold trading continues.
It’s been another wild day for trading in Crude oil with big moves in both directions as traders try to figure out what the rising tensions between Iran and Saudi Arabia could mean for the supply side of the market. Two duelling scenarios that have fed the bulls and the bears today include:
The proxy war being fought between the two countries in places like Syria and Yemen could ignite into more direct engagement and spark actions like blockades that could impact the ability of either country to supply oil to world markets. The prospect of supply disruptions drove the price higher in early trading.
Rather than engaging in overt activities, Saudi Arabia and Iran could continue their economic war, boosting or maintaining higher oil production in a bid to bankrupt the other. This prospect would explain why the upside for oil was limited and it fell in the afternoon.
What this weekend’s events does mean is that Saudi Arabia and Iran are unlikely to work together to stabilize the oil market any time soon meaning the stalemate at OPEC and higher volatility (and trading opportunities) in oil are likely to continue for a long time to come.
There have been no major announcements after the US close today.
Significant announcements released overnight include:
US construction spending (0.4%) vs street 0.7%
Germany consumer prices 0.3% vs street 0.6%
Manufacturing PMI reports:
US Markit 51.2 vs street 51.1
US ISM 48.2 vs street 49.0 and previous 48.6
Canada 47.5 vs previous 48.6
Sweden 56.0 vs previous 54.9
Poland 52.1 vs street 52.3
Spain 53.0 vs street 53.6
Italy 55.6 vs street 54.9
France 51.4 vs street 51.6
Germany 53.2 vs street 53.0
Greece 50.2 vs previous 48.1
UK 51.9 vs street 52.8
Upcoming significant economic announcements include:
(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)
8:00 am GMT Norway manuf PMI previous 47.6
9:30 am GMT UK construction PMI street 56.0
8:00 am GMT Spain unemployment change street (50K)
8:55 am GMT Germany unemployment change street (8K)
8:55 am GMT Germany unemployment rate street 6.3%
10:00 am GMT Eurozone consumer prices street 0.3%
10:00 am GMT Eurozone core CPI street 1.0%
8:30 am EST Canada industrial prices street 0.0%
8:30 am EST Canada raw material prices street (2.5%)
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