North American traders came back from the long weekend in a volatile mood, sparking significant swings in world markets. September has been a volatile month where traders reassess their projections. This year, it looks like the complacency that set in over the summer has been shattered and traders are waking up to the risks out there.
US indices started selling off when US exchanges opened and accelerated with factory orders falling 3.3% as expected. While North Korea apparently planning an ICBM test to follow its weekend nuclear test has been getting the headlines, the ongoing potential for a US government shutdown amid battles over the budget, debt ceiling, tax reform and disaster relief, represents a bigger risk to the US economy and markets. A lack of progress in NAFTA talks also may have impacted sentiment. Major US indices fell 1.2% on the day while the FTSE fell 0.5%.
It also has been another big day for energy trading. With cleanup and restoration underway following Hurricane Harvey, and Hurricane Irma still out over the Atlantic, last week’s energy trades have reversed course. WTI rallied 2.9% Thursday while gasoline dropped 3.2%. Irma, now a Category 5 storm, has been setting records and could start to have an impact on trading later this week or early next week depending on which way it tracks toward Florida.
In currency trading
today, gold consolidated Monday’s breakout while JPY attracted capital leaving stocks and looking for risk havens. GBP has been gaining on EUR and regained $1.3000 against USD as the island nation takes a firm stand on the Brexit divorce bill and the government prepares to introduce its EU repeal bill to the House of Commons. The US Dollar continues to weaken after Fed Governor Brainard indicated that even though the Fed is close to starting balance sheet reduction, she is cautious on raising rates until inflation gets closer to 2% which traders took as dovish. Tomorrow’s Beige Book may launch another round of Fed speculation trading.
CAD has continued to climb today as traders prepare for tomorrow’s Bank of Canada meetings. No change is expected after Governor Poloz raised rates at the last meeting. Loonie trading, however, does indicate that the street is expecting a hawkish statement and hints toward another rate hike this year following last week’s spectacular Canadian GDP report.
Asia Pacific markets may remain active as the North Korea crisis remains in focus. Australia GDP and Singapore PMI may attract some attention.
There have been no major announcements after the close today.
Significant announcements released overnight include:
US factory ordersstreet (3.3%) vs previous 3.0%
UK service PMI53.2 vs street 53.5
Germany service PMI53.5 vs street 53.4
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)
7:00 pm EDTFOMC Kaplan speaking
10:30 am AESTSingapore PMIprevious 51.3
11:30 am AESTAustralia Q2 GDP updatestreet 1.9% vs previous 1.7%
7:00 am BSTGermany factory ordersstreet 5.8%
8:30 am EDTCanada trade balancestreet ($3.3B)
8:30 am EDTUS trade balancestreet ($44.7B)
10:00 am EDTBank of Canada interest rate0.75% no change expected
10:00 am EDTUS ISM non-manufacturing PMIstreet 55.5 vs previous 53.9
2:00 pm EDTUS Beige Book
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