With markets in the UK Europe closed for a holiday on Monday, trading was light in North American stocks. The thin market may have contributed to the significant selloffs we did see on precious metals and energy commodities.
WTI crude oil dropped 1.2% while gasoline fell 1.6% to start the week. Oil came under pressure as production out of Libya increased as two major fields which have been on and off line in recent months came back on line again (but who knows for how long?). Meanwhile, gasoline came under pressure after President Trump indicated being open to raising the gasoline tax.
Gold and silver also came under pressure dropping 1.0% and 2.4% respectively. The Japanese Yen also dropped. Capital moved out of defensive havens as some political risks eases. Congressional leaders came up with a funding deal to avert a government shutdown this week and push the big budget battle off to September/October. Meanwhile, President Trump indicated a willingness to meet with North Korean President Kim Jong Un under the right circumstances. There also has been another round rumours of a health care vote this week.
Political tensions easing in some areas has helped to increase enthusiasm selectively for risk markets. The NASDAQ broke out to a new all-time high gaining 0.8% today and the S&P/ASX has been trading higher overnight as well but the Dow and S&P have only managed to hold steady through the day.
The market ignored comments from President Trump that he is thinking about breaking up big banks, suggesting that many traders don’t believe it. This suggests that the more traders see of the President making big pronouncements or promises and later either backing down or being forced to back down by others, the less they are likely to react initially.
AUD and NZD have remained strong overnight in the wake of Monday’s strong PMI and MI inflation reports, with AUDUSD
trading comfortably back above $0.7500. Today’s main event is the latest RBA meeting and statement. Since the last meeting economic data for Australia has been positive, particularly a 61K increase in net jobs in the last employment report. Meanwhile, AUD is down slightly from where it was a month ago. This suggests that a rate cut is unlikely, and there’s no reason for Governor Lowe to aggressively talk down the Aussie dollar, so it’s likely to be a neutral statement.
The next 24 hours also brings more manufacturing and service PMI reports from China, Japan and Europe. North America has a light news day, a pause before things really ramp up through the rest of the week.
There have been no major announcements after the US close today.
Significant announcements released overnight include:
Canada manufacturing PMI 55.9 vs previous 55.5
US Markit manufacturing PMI 52.8 as expected
US ISM manufacturing PMI 54.8 vs street 56.5
US ISM prices paid 68.5 vs street 67.5 vs previous 70.5
US ISM new orders 57.5 vs previous 64.5
US ISM employment 52.0 vs previous 58.9
US construction spending (0.2%) vs street 0.4% vs previous 0.8%
US personal income 0.2% vs street 0.3%
US personal spending 0.0% vs street 0.2%
US real personal spending 0.3% vs street 0.4%
US PCE core inflation 1.6% as expected vs previous 1.8%
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)
10:30 am AEDT Japan service PMI previous 52.9
11:45 am AEDT China Caixin manufacturing PMI street 51.3
2:30 pm AEDT Australia cash rate 1.50% no change expected
9:30 am BST UK manufacturing PMI street 54.0
8:55 am BST Germany manufacturing PMI street 58.2
8:50 am BST France manufacturing PMI street 55.1
8:45 am BST Italy manufacturing PMI street 56.0
8:15 am BST Spain manufacturing PMI street 54.4
9:00 am BST Greece manufacturing PMI previous 46.7
There are no major announcements scheduled for North America on Tuesday