Falling oil, rising EUR, mixed stocks greet Japan’s return to trading
All of the uncertainty stirred up over the last several days around central banks, the auto sector and economic growth continues to swirl around world trading sending markets in wildly different directions, and keeping the future cloudy.
US stock markets shrugged off early losses and finished the day close to flat as traders bat around when the Fed might start raising interest rates ahead of a speech from FOMC Chair Yellen tomorrow. Flash PMI was in line with expectations which kept USD relatively well supported.
Trading in crude oil, however was more decisive as WTI plunged nearly 3.0% after this week’s DOE report showed a decline in demand even though inventories fell even faster. Meanwhile, the RSI sent a bearish technical momentum signal also indicating another downdraft could be starting. With refineries shutting down for their usual seasonal retooling (shift in focus from gasoline to heating oil) data and trading in crude oil could remain volatile for the next several weeks.
Comments from ECB speakers today including President Draghi has had a big impact on trading on the continent today. The general tone of the comments was neutral, highlighting that although Europe had difficulties in the summer, it remains unknown if these struggles are temporary or not. Although the central bank remains ready to act if needed, it has no immediate plans to increase stimulus. Ultra doves who had been banking on an immediate aggressive increase to QE had to scramble to get back on side boosting EUR and taking the wind out of continental indices. Meanwhile, Volkswagen’s CEO stepped down in disgrace helping its stock rebound 6% (which remains small relative to the near 29% losses over the previous two days) which helped to shore up support a bit.
Japanese markets return to trading from holidays today to find very muddy waters and crosscurrents in world trading trends. Flash PMI for Japan could have an influence on early trading along with catch-up moves. Japan could also see some positioning ahead of tomorrow’s inflation numbers.
China could also attract attention with follow through from yesterday’s poor flash PMI report potentially tempered by news China placed a big aircraft order with Boeing today. NZD could also be active today on trade figures.
In Europe Thursday, the focus turns to Scandinavia with big announcements expected from Norway and Sweden. In particular, traders may focus on the Norges Bank decision for an indication of how the oil price crash is impacting its economy. Recall that Norges Bank decisions have been a predictor of Bank of Canada decisions for the last year (ie the two Bank of Canada cuts directly followed Norges Bank cuts), so CAD could also be active on the rate decision.
There are also a number of significant data reports in the US for traders to digest as traders await Fed Chair Yellen’s speech late in the day, hoping she will help to clear up confusion as to whether the central bank plans to raise interest rates this year or not.
Boeing confirmed 300 aircraft order from China indicated plans to build a manufacturing plant in China, plans to ramp up 737 production from 42 a month now to 47 in 2017 and 52 in 2018
Significant announcements released overnight include:
US flash manufacturing PMI 53.0 vs street 52.8
US DOE crude oil inventories (1.9 mmbbls) vs street (1.25 mmbbls)
US DOE gasoline inventories 1.3 mmbbls vs street (0.85 mmbbls)
US DOE oil implied demand 16,587 mmbbls vs previous 16,607 mmbbls
Canada retail sales 0.5% vs street 0.7%
Canada retail ex auto 0.0% vs street 0.5%
France GDP update 1.1% vs street 1.0%
France flash manufacturing PMI 50.4 vs street 48.6
France flash service PMI 51.2 vs street 51.0
Germany flash manuf PMI 52.5 vs street 52.6
Germany flash service PMI 54.3 vs street 54.5
Upcoming significant announcements include:
8:45 am AEST NZ trade balance street ($850M)
11:35 am AEST Japan flash manufacturing PMI street 51.2
8:00 am BST Sweden Riksbank Ingves and Skingsley speaking
8:00 am BST Sweden consumer confidence street 99.0
9:10 am BST Sweden Riksbank bond purchases
9:00 am BST Norway interest rate 1.00% no change expected
9:30 am BST Norway Norges Bank Olsen speaking
9:00 am BST Germany IFO business climate street 107.9
9:00 am BST Germany IFO crnt assessment street 114.7
9:00 am BST Germany IFO expectations street 101.4
10:00 am BST Italy retail sales street 0 8%
10:15 am BST ECB announces TLTRO allotments
8:30 am BST US jobless claims street 272K
8:30 am BST US durable goods orders street (2.3%)
8:30 am BST US durables ex transport street 0.1%
10:00 am BST US new home sales street 515K
10:30 am BST US natural gas street 98 BCF
11:00 am BST US Kansas city Fed street (6) vs previous (9)
5:00 pm EDT US FOMC Chair Yellen speaking
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