t had appeared early on that the bears were going to have the run of the markets again today but big bullish intraday reversals in WTI and other energy commodity markets helped US indices to regain their footing and push back into the green by the end of the day, sending positive momentum into a light on news Asia Pacific trading session.
What’s particularly encouraging about today’s rebound is that it comes in the face of a lot of bad news. US flash service PMI showed a surprise decline under 50 into contraction territory and new home sales coming in below expectations raised more questions about the health of the US economy. Talk from Fed members has been relatively supportive over the last 24 hours with recognition of volatility but no signs of panic from Governor Fischer or Regional Presidents George or Lacker.
That catalyst that turned things around today was the DOE inventory reports. Crude oil inventories rose by 3.5 mmbbls which was more than expected but less than half of the 7 mmbbl API increase that had knocked oil down overnight. The active NYMEX contract holding well above $30.00 and the cash contract rising back above $30.00 indicate continued underlying support and the rally on what looked like bad news at first glance suggests traders looking for a reason to get bullish again not bearish. Gasoline inventories fell more than expected, sparking a 5.5% rally that also helped the bulls cause while Brent crude rallied 3.7% and WTI gained 1.1%.
The turnaround in sentiment also played out in currency markets where early gains by gold and JPY were stopped and reversed by the end of the US trading day. USDJPY
held its recent low near 111.00 to complete a double bottom. The flight to havens appears to be nearing an end with capital starting to flow back into risk markets and resource currencies like AUD, NZD and CAD. GBP, on the other hand, broke down below $1.4000 as Brexit risks continue to overhang Sterling but it’s getting really oversold so it wouldn’t take much to spark a big snap back bounce once it gets washed out.
Overall, it appears that the selloff of the last couple of days was a normal correction within an emerging bullish trend, not the start of a new downtrend at least for stocks and crude oil, while gold and especially JPY appear to be peaking for now.. The next big news report with the potential to move the markets is tomorrow morning’s US durable goods report with traders looking for a big bounce from a dismal report last month.
There have been no major announcements after the US close today.
Significant announcements released overnight include:
US flash service PMI 49.8 vs street 53.5 vs previous 53.2
US new home sales 494K vs street 520K
US DOE crude oil inventories 3.50 mmbbls vs street 3.25 mmbbls
US DOE gasoline inventories (2.2 mmbbls) vs street (1.0 mmbbls)
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 EST FOMC Bullard speaking
8:00 am GMT Sweden consumer confidence street 96.8
8:00 am GMT Spain GDP street 3.5%
9:30 am GMT UK GDP street 1.9%
10:00 am GMT Eurozone consumer prices street 0.4%
10:00 am GMT Eurozone core CPI street 1.0%
8:15 am EST FOMC Lockhart speaking
8:30 am EST US durable goods orders street 2.7% vs previous (5.0%)
8:30 am EST US durables ex transport street 0.3% vs previous (1.0%)
8:30 am EST US jobless claims street 270K
9:00 am EST US FHFA house prices street 0.5%
10:30 am EST US natural gas storage street (144 BCF)
11:00 am EST US Kansas City Fed (6) vs street (9)
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