t’s been another mixed day for trading. US indices spent the day trading flat with gains by utilities and energy companies offset by declines in financials and consumer discretionary stocks. A smaller than expected US trade deficit helped to provide some support.
The biggest moves were in crude oil and related markets WTI jumped 1.4% on the news that China has surpassed Canada as the biggest purchaser of US crude oil, a sign of strong demand for energy. This rally helped to pull the resource weighted S&P/TSX up 0.4% with materials, telecom and industrials also gaining in Canada. CAD remains sensitive to swings
in oil which dampened the positive response to Monday’s positive Canadian manufacturing PMI but today offset a surprise Canada trade deficit.
Late in the day, API crude oil inventories were reported down 1.8 mmbbls, suggesting that the big build of recent months may be over and supporting recent gains in the oil price. DOE inventories are due tomorrow with the street expecting a small increase in crude oil stockpiles and more drawdowns for gasoline and distillates in the 1-2 mmbbl range.
Today brings service PMI reports from around the world, starting with Australia, Japan and Singapore. House and commodity prices could attract attention to New Zealand, particularly with NZDUSD having broken under $0.7000 this week. AUD has also been struggling overnight but so far continues to hold above the $0.7500 level.
Tomorrow morning brings more service PMI reports for Europe and the US, but the main event is US ADP payrolls. 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.
There have been no major corporate reports after the US close today.
Significant announcements released overnight include:
NZ QV house prices 12.9% vs previous 13.5%
Canada trade balance ($0.97B) vs street 0.55B
US trade balance ($43.6B) vs street ($44.5B)
US factory orders 1.0% as expected
UK construction PMI 52.2 vs street 52.5
Eurozone retail sales 1.8% vs street 1.0%
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)
12:00 am BST UK BRC shop prices street (0.8%)
11:00 am AEST NZ ANZ commodity prices previous 2.0%
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 PMI Reports:
9:30 am AEST Australia previous 49.0
10:30 am AEST Singapore previous 51.4
10:30 am AEST Japan previous 51.3
9:30 am BST UK street 53.4
8:55 am BST Germany street 55.6
8:50 am BST France street 58.5
8:45 am BST Italy street 54.3
8:15 am BST Spain street 57.4
9:45 am EDT US Markit street 53.1
10:00 am EDT US ISM street 57.0
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