It’s another big day for economic news that could potentially move the markets. Overnight, the spotlight has been on crude oil which has seen both Brent and WTI gain 0.9% and WTI put $50.00 farther into the rear view mirror. A 1.8 mmbbl drawdown in US API crude oil, a 2.5 mmbbl drop in gasoline inventories and a 2.0 mmbbl drop in distillate inventories helped to reignite interest in energy commodities by indicating the big builds of recent months are over and the market is starting to come back into balance. The results were better than what is being expected from this morning’s DOE reports, so there is potential for a positive surprise on the numbers. A miss, on the other hand, could spark a reversal so there’s potential for more action in energy markets today.  

Stock markets around the world along with most currencies have been holding steady overnight. US index futures and the FTSE are flat while the Dax is down 0.4% and the Nikkei up 0.3%. Service PMI reports from around the world have been mixed with US numbers due mid-morning. France’s CAC is up 0.1% after last night’s Presidential all-candidates debate with reports suggesting Melanchon turning in a strong performance while Le Pen apparently less visible with other Euro-skeptics on the stage. 

Currency markets have been steady for the most part. A missile test by North Korea ahead of the upcoming US Trump &ndash China Xi summit hasn’t sparked a move into defensive plays like gold or JPY which are steady today. The biggest move in currencies has been a strong bounce by the British Pound which has climbed back toward $1.2500 against the US Dollar. A stronger than expected UK PMI report and suggestions UK PM May could be flexible on movement of people, an area that could be a sticking point in negotiations. The EU Parliament passed a resolution on the Brexit process so the wheels are turning away while both sides continue to stake out positions. 

US ADP payrolls are due this morning. The street is looking for a big retrenchment back toward 190K from 298K last month. A positive employment to US manufacturing PMI on Monday, however, suggests that there may still be a positive Trump effect on employment so I am thinking 250K. 

FOMC minutes are due in the afternoon but are likely to be a non-event considering the street has had several weeks to react to the dot plot, statement and numerous comments from Fed officials since the meeting. The big question remains whether the Fed will slow rate hikes at some point and shift focus to shrinking its balance sheet. The surprise resignation of Richmond Fed President Lacker over leaked information hasn’t impacted trading but does highlight an ongoing changing of the guard at the Fed likely to continue over the next year. 


Corporate News

There have been no major corporate announcements this morning. 


Economic News

Significant announcements released overnight include:

US API crude oil inventories     (1.8 mmbbls) 


Service PMI Reports:

Japan        52.9 vs previous 51.3

UK        55.0 vs street 53.4
Germany    55.6 as expected
France        57.5 vs street 58.5
Italy        52.9 vs street 54.3
Spain        57.4 as expected


Upcoming significant economic announcements include:

8:15 am EDT        US ADP Payrolls        street 190K vs previous 298K

10:30 am EDT        US DOE crude oil inventories    street (0.15 mmbbls) 
10:30 am EDT        US DOE gasoline inventories    street (1.75 mmbbls) 
10:30 am EDT        US DOE distillate inventories    street (1.0 mmbbls) 

2:00 pm EDT        FOMC meeting minutes


Service/Non-Manufacturing PMI reports: 

9:45 am EDT        US Markit    street 53.1
10:00 am EDT        US ISM        street 57.0

 

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