We’re moving from the seasonally weakest time of the year for stocks to the seasonally strongest, and this morning finds trading rebounds in markets underway across all three major trading regions (Asia Pacific, UK and Europe, North America). Service PMI reports have been coming out overnight with mixed results so far. China, Japan and the UK showed improvement while Australia and Germany softened.
US data has been mixed so far. ADP payrolls slowed a bit, in line with expectations. To see a big job disappointment, check out how NZD plunged on very weak employment growth. The downward revision to last month is not a surprise as it just brings ADP down closer to last month’s weak nonfarm payrolls. The US trade balance, meanwhile, narrowed significantly, a big improvement over last month.
Overall, the data suggests that the US economy continues to chug along and has not weakened enough to knock the Fed off its track toward raising interest rates in December. The Fed remains in focus today with several permanent governors speaking. Governor Brainard remains on the dovish side indicating she remains data dependent and is still seeing slack in the economy. Comments from the Big 3 (Yellen, Dudley and Fischer) could give a better indication of which way the wind is blowing at the central bank these days.
USD has been trading upward moderately today on anticipation of a more hawkish leaning Fed. NZD took a big tumble overnight on the weak New Zealand employment figures. Other majors are moderately lower with CAD holding up relatively well as oil continues to climb. EUR and continental currencies like SEK and NOK are underperforming with more ECB stimulus expected, relative to GBP AUD and JPY, where no more stimulus appears to be forthcoming.
In addition to the big Fed speeches, service PMI and energy inventories could keep US markets hopping through the day. Tesla Motors and Groupon may be active in response to last night’s earnings while Facebook may see positioning ahead of tonight’s earnings.
Tesla Motors ($0.58) vs street ($0.60) guides Q4 deliveries to 17K-19K vehicles above street 16.5K
Groupon ($0.04) vs street ($0.02) sales $713M vs street $732M, guides next Q earnings to ($0.01) to $0.01 below street $0.07, guides next Q sales to $815-865M below street $956M
Significant announcements released overnight include:
US ADP payrolls 182K vs street 180K
US ADP payrolls prior month revised down to 190K from previous 200K
US trade balance ($40.8B) vs street ($41.0B)
Canada trade balance ($1.73B) vs street ($1.75B)
Poland interest rate 1.50% no change as expected
UK BRC shop prices (1.8%) vs previous (1.9%)
NZ employment change 1.5% vs street 2.5%
NZ unemployment rate 6.0% as expected
Australia trade balance ($2.3B) vs street ($2.9B)
Australia retail sales 0.4% as expected
Service PMI Reports:
UK 54.9 vs street 54.5
Sweden 57.5 vs street 55.5
Spain 55.9 vs street 55.4
Italy 53 4 vs street 53.5
France 52.7 vs street 52.3
Germany 54.5 vs street 55.2
Eurozone 54.1 vs street 54.2
Australia 48.9 vs previous 52.3
52.2 vs previous 51.4
China Caixin 52.0 vs previous 50.5
Singapore Nikkei PMI 50.2 vs previous 51.4
India 53.2 vs previous 51.3
Upcoming significant announcements include:
9:45 am EST US Markit service PMI street 54.5
10:00 am EST US ISM non-manuf PMI street 56.5
10:00 am EST FOMC Yellen testimony
2:30 pm EST FOMC Dudley speaking
7:30 pm EST FOMC Fischer speaking
10:30 am EST US DOE crude oil inventories street 2.25 mmbbls
10:30 am EST US DOE gasoline inventories street (1.1125 mmbbls)
10:30 am EST US DOE implied oil demand previous 15,662 mmbbls
After 4:00 pm EST Facebook earnings
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