Stock markets are trading lower overnight and into this morning‎. In Europe, the CAC is down 1.1%, the Dax and IBEX down 0.9% and the FTSE 0.8% lower.

In the US, NASDAQ futures are 0.8% weaker. Dow and SPX futures are down 0.4%, along with the Nikkei.

There doesn't appear to be a clear reason for the sell-off beyond technical exhaustion and repositioning ahead of earning season. There has been more sabre rattling over North Korea but markets one would expect to see most impacted like the Nikkei and gold haven't moved. EUR and GBP are trading higher against USD, which could influence markets across the pond but not in North America. 

US weakness could be partially due to yesterday's FOMC minutes, which indicated some members would like to start working down the balance sheet within a couple of months while others would prefer to wait until later in the year. I still think they won't make another move until the debt ceiling and budget battles are sorted out.

The market with the most clear and decisive action today is crude oil. Shrugging off a 4% decline yesterday, WTI is up 1.5% this morning, with CAD climbing as well. A big 5.75 mmbbl drop in API oil inventories and a 5.0 mmbbl drop in API gasoline inventories ignited the rebound. Oil may remain active through today's DOE reports with traders looking for confirmation of these drawdowns.

Today’s ADP and Friday’s non-farm payrolls may give an indication of whether the US economy is still able to absorb the Fed easing back on the gas pedal. 

Last month there was a huge discrepancy between ADP payrolls of 253K and non-farm payrolls of 138K. As a result, we could see a significant downward revision to last month’s ADP figures or an upward revision to non-farm payrolls. Currency, traders are expecting ADP payrolls to drop back to 185K. Even though US manufacturing PMI reports were positive, the potential for a negative surprise remains. 

US trade and Service PMI reports may also attract attention from traders looking for insight into whether the Fed may start cutting back on its balance sheet sooner, or later. We also could see positioning ahead of tomorrow’s G-20 summit with trade, North Korea and climate change among the potential flashpoints. 

Significant announcements released overnight:

Germany factory orders 3.7% vs street 4.5%

Upcoming significant economic announcements:

12:30pm BST ECB meeting minutes
5pm BST ECB Weidmann, Nowotny panel on future of ruro
8:15am EDT US ADP payrolls street 185K vs previous 253K
8:30am EDT US jobless claims street 244K
8:30am EDT US trade balance street ($46.3B)
8:30am EDT Canada  trade balance street ($0.5B)
9:45am EDT US Markit service PMI street 53.0
10am EDT US ISM non-manufacturing PMI street 56.5
10am EDT FOMC Powell speaking
11am EDT  US DOE crude oil inventories street (1.8 mmbbls) 
11am EDT US DOE gasoline inventories street (1.6 mmbbls) 

 

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