Stocks rally on positive PMI and WTI taking a run at $50
19:00, 04 October 2016
· By CMC Markets
US stocks finished well into the green led higher by the Financial and Energy sectors with three main factors driving the gains.
First, financials rallying suggests that concerns about Deutsche Bank's capital problems crashing the financial system continue to ease with either a lower US fine or some kids of one-off German government assistance the likely solution. Gains also suggest that traders may be seeing the beginning of the end to stimulus in Europe as a positive since negative rates have been hurting banks and killing pension funds.
Second, oil has been on fire this week and caught another tailwind from a surprise nearly 3.0 mbbls drawdown in API inventories adding fundamental support to OPEC speculation. WTI gains have propelled energy stocks higher but it now faces a big test at the big $50.00 level. OPEC related trading could pick up again with reports suggesting another informal meeting between OPEC and non-OPEC producers could be held this weekend or next week to try and work out details for individual country production levels and overall cuts.
Third, US economic news was generally favourable for corporate earnings expectations. ADP payrolls came in soft but at 154K was not bad enough to discourage Fed hawks especially after known dove Chicago Fed Evans indicated a rate hike could come as soon as November. A blowout non-manufacturing PMI report that saw big increases in headline, employment and new orders readings quickly plus improved factory orders quickly overshadowed ADP.
It's a lighter day for economic news as traders now look ahead to Friday's US nonfarm payrolls report. JPY remains under pressure with the Bank of Japan looking increasingly isolated in the dovish camp. A lower yen relative to USD and EUR could boost Japanese exporter stocks. NZD meanwhile has also been breaking down with dairy prices still falling. Australia’s trade balance may attract some attention as well.
There have been no major announcements after the US close today
Significant announcements released overnight include:
US ISM non-manufacturing PMI 57.1 vs street 53.0 and previous 51.4
US ISM employment 57.2 vs previous 50.7
US ISM new orders 60.0 vs previous 51.4
US Markit Service PMI 52.3 vs street 51.9
UK service PMI 52.6 vs street 52.2
US ADP Payrolls 154K vs street 165K vs previous 177K
US trade balance ($40.7B) vs street ($39.2B)
Canada trade balance ($1.9B) vs street ($2.4B)
US Factory Orders 0.2% vs st (0.2%) previous revised down to 1.4% from 1.9%
US DOE crude oil inventories (2.9 mmbbls) vs street 1.5 mmbbls
US DOE gasoline inventories 0.2 mmbbls vs street 0.5 mmbbls
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)
11:30 am AEDT Australia trade balance street ($2.3B)
7:00 am BST Germany factory orders street 1.6%
10:00 am BST Greece unemployment rate street 23.2%
12:30 pm BST ECB meeting minutes
8:30 am EDT US jobless claims street 256K
10:30 am EDT US natural gas street 65 BCF
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