eptember is historically the weakest month of the year for stock markets and after a quiet start this month has turned out to be no exception. Yesterday’s Brainard Bounce turned out to be more of a Dead Cat Bounce and markets have resumed their declines recognizing that the case for a rate hike being “less compelling” also means a slower US economy and weaker outlook for corporate earnings.
Remember last Thursday when the only thing that kept US markets above water was an inventory driven spike in the oil price? Today’s action reminds traders that the impact of commodity prices cuts both ways. Despite positive economic numbers out of China, the price of crude oil has been plunging though the day with WTI down 2.75% but holding $45.00 and Brent down 2.25%. Bears have taken charge after the International Energy Agency reported that world energy demand slowed more than expected this summer and forecast the supply overhang could continue through the first half of 2017 at least.
Crude oil and other energy commodities may remain active over the next 24 hours between this afternoon’s API inventories and tomorrow’s mid-morning DOE reports. The street is expecting sizeable increases this week in a normal retrenchment following last week’s massive 11-15 mmbbl decreases. Another million barrel drawdown is expected for gasoline as we near the end of summer driving season.
USD has been on the rebound posting 1.0%-1.5% gains against many of the resource currencies, not just oil currencies like CAD and MXN but also AUD and NZD. NOK and RUB are down only 0.5% in contrast reflecting a smaller decline for Brent relative to WTI. A higher US Dollar along with rising bond yields indicates that despite yesterday’s dovish Brainard comments, traders have not ruled out a rate hike this meeting or at least additional hints toward a December increase like last year.
GBP has also been sliding after UK inflation pressures eased a bit and ahead of tomorrow’s big UK employment report.
JPY could be active today as speculation continues to swirl around what the Bank of Japan may do at its meeting next week. Today’s Japan industrial production report may indicate how much pressure it is under to bring in even more stimulus. NZD
There have been no major corporate announcements after the US close today.
Significant announcements released overnight include:
UK consumer prices 0.6% vs street 0.7%
UK core CPI 1.3% vs street 1.4%
UK retail prices 1.8% as expected
UK producer input prices 7.6% vs street 8.2%
UK producer output prices 0.8% vs street 1.0%
UK house prices 8.3% vs previous 8.7%
Germany ZEW current 55.1 vs street 56.0
Germany ZEW expectations 0.5 vs street 2.5
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)
7:30 am AEST NZ REINZ house sales previous (10.1%)
10:30 am AEST Australia consumer confidence previous 101.0
2:30 pm AEST Japan industrial production previous (3.8%)
8:30 am BST Sweden GDP street 3.1%
10:00 am BST Eurozone industrial production street (0.8%)
9:30 am BST UK jobless claims street 2K vs previous (8K)
9:30 am BST UK 3M employment change street 171K
9:30 am BST UK unemployment rate street 4.9%
9:30 am BST UK average weekly earnings street 2.1%
8:30 am EDT Canada Teranet house prices previous 10.9%
10:30 am EDT US DOE Crude oil inventories street 4.0 mmbbls vs previous (14.5
10:30 am EDT US DOE gasoline inventories street (1.1 mmbbls) vs previous (4.2
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