With the focus turning away from PMI data toward the upcoming removal of large shareholder selling bans as the culprit for Monday’s big China selloff, today’s Chinese service PMI report may give a better indication of whether economic or market factors are now driving trading. Reports are also due from a number of other major Asia Pacific countries which could spark additional trading activity.
It's been a choppy day of trading for markets in Europe and North America with traders trying to figure out if Monday’s China driven selling was a brief hiccup or a sign of things to come. In Europe, stock traders initially responded negatively to strong employment numbers for Germany and Spain but then rebounded when weak Eurozone consumer prices stoked deflation fears and sent EUR lower.
US indices spent most of the day trading flat to slightly lower but managed to stage a late rally enabling the Dow and S&P to both finish in the green. There was limited follow through to Monday’s poor US manufacturing PMI report as traders positioned ahead of tomorrow’s ADP payrolls and FOMC minutes.
Crude oil took one on the chin again with traders increasingly recognizing that rising tensions between Saudi Arabia and Iran are less likely to spark a shooting war (and oil supply disruptions) and more likely to add to an ongoing economic war where the countries use low oil prices to inflict pain on the other. In this environment, cooperation to control supply and stabilize the market appears highly unlikely. This means that oil trading may remain volatile for some time to come, potentially creating trading opportunities. A big surprise drop in API crude oil inventories has only had a small effect so far boosting WTI by about 40 cents, relatively small compared with the declines of the last day or so.
There have been no major announcements after the US close today.
Significant announcements released overnight include:
US API crude oil inventories (5.6 mmbbls) vs street 0.5 mmbbls
Canada industrial prices (0.2%) vs street 0.0%
Canada raw material prices (4.0%0 vs street (2.5%)
Norway manuf PMI 46.8 vs previous 47.6
UK construction PMI 57.8 vs street 56.0
Spain unemployment change (55K) vs street (50K)
Germany unemployment change (14K) vs street (8K)
Germany unemployment rate 6.3% as expected
Eurozone consumer prices 0.2% vs street 0.3%
Eurozone core CPI 0.9% 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)
12:45 pm AEDT China consumer sentiment previous 113.1
12:00 am GMT UK BRC shop prices previous (2.1%)
10:00 am GMT Eurozone producer prices street (3.2%)
8:15 am EST US ADP Payrolls street 198K
8:15 am EST US ADP revision previous 217K
8:30 am EST US trade balance street ($44.0B)
8:30 am EST Canada trade balance street ($2.6B)
10:00 am EST US factory orders street (0.2%)
10:30 am EST US DOE crude oil inventories street 1.0 mmbbls
10:30 am EST US DOE gasoline inventories street 2.1 mmbbls
10:30 am EST US implied oil demand previous 16,718 mmbbls
2:00 pm EST US FOMC minutes
Service PMI reports:
9:30 am AEDT Australia previous 48.2
12:35 pm AEDT Japan previous 51.6
12:45 pm AEDT China Caixin previous 51.2
1:15 pm AEDT Singapore Nikkei
PMI previous 52.2
4:00 pm AEDT India previous 50.1
8:15 am GMT Spain street 56.6
8:45 am GMT Italy street 53.6
8:50 am GMT France street 50.0
8:55 am GMT Germany street 55.4
9:30 am GMT UK street 55.6
9:45 am EST US Markit street 54.0
10:00 am EST US ISM street 56.0
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