US indices have kicked off the new month with a 0.5% rally, suggesting that the recent trading correction has come to an end as overbought conditions have eased. On a lighter day for earnings news, gains have been broad-based with Consumer Discretionary, Staples, Utilities and Financials all posting 1.0% gains and Energy the only sector in the red.
Energy stocks were knocked back in the US and Canada by a 2.5% drop in the price of WTI oil. Oil prices held up overnight but started to fall as US traders arrived for work, on no new news. This suggests that Friday’s may have partly been a short squeeze at month end and that some traders decided over the weekend to take profits to start the new month. RUB fell slightly while CAD and NOK held steady on the day indicating that traders see this decline as a normal trading correction. The collapse of the Halliburton/Baker Hughes merger didn’t have a big impact on trading. Halliburton actually rose 3% on the news with integration and other deal related risks going away.
Canadian mining and energy stocks dropped back on the day. Gold fell back after testing $1,300/oz while copper also slipped a bit. This suggests that Australian stocks could be vulnerable to start the day. We could see more action in copper and miners around the Caixin China PMI report.
AUD and NZD have been climbing to start the week with USD still in retreat. AUD could be particularly active around today’s RBA decision and statement. The RBNZ didn't cut rates last week and the RBA is expected to stay the course as well following last month’s job gains. It’s possible though between the weak manufacturing PMI and subdued inflation reports that the RBA could hint toward possible cuts in future if needed. The central bank may also try to talk AUD down again with it still trading above 75 cents.
There have been no major announcements after the US close today.
Significant announcements released overnight include:
US construction spending 0.3% vs street 0.5%
Manufacturing PMI reports:
Canada RBC 52.2 vs previous 51.5
US Markit 50.8 as expected
US ISM 50.8 vs street 51.4
US ISM prices paid 59.0 vs street 52.0
US ISM new orders 55.8 vs previous 58.3
Germany 51.8 vs street 51.9
France 48.0 vs street 48.3
Italy 53.9 vs street 53.0
Spain 53.5 vs street 53.0
Sweden 54.0 vs street 53.0
Norway 48.0 vs street 47.8
Eurozone 51.7 vs street 51.5
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)
5:30 pm EDT FOMC Williams speaking
11:30 am AEST Australia building approvals street (14.0%)
2:30 pm AEST Australia interest rate 2.00% no change expected
11:45 am AEST Chian Caixin manufacturing PMI street 49.8
8:30 am GMT Sweden industrial production street 3.4%
9:30 am GMT UK manufacturing PMI street 51.2
10:00 am GMT Eurozone producer prices street (4.3%)
10:30 am EDT FOMC Mester speaking
12:30 pm EDT Bank of Canada Poloz speaking