Stock markets around the world have continued to climb, a positive sign as it shows yesterday’s gains were based on more than short covering and quarter end account squaring. Renewed enthusiasm has emerged this week with the seasonally weakest time of the year for stocks nearing its end and a number of overseas indices holding their August lows.
Overnight, we’ve seen a ton of manufacturing PMI reports from around the world, giving an early indication of economic conditions in September. Some of the key takeaways for trading include:
China’s economy remains sluggish but it is NOT going off a cliff as had been feared during the summer stock market plunge
Commodity sensitive economies are starting to rebound. Both Australia and Norway showed improvement although Sweden remained soft.
Greece is starting to bounce back from its summer turmoil but still has a long way to go in its turnaround.
UK was a bit stronger than expected, Germany a bit weaker than expected
Overall the PMI results were mixed, but the street has taken them positively. We appear to be at a point where significant negativity has been priced into markets leaving room for positive surprises and relief rebounds as economies don’t appear to be in the dire straits that had been feared.
This is important to remember heading into today’s North American trading session and data announcements for the US. jobless claims were on course with manufacturing PMI and construction spending later this morning plus nonfarm payrolls tomorrow. It's important to remember that based on Fed comments over the last week, the central bank appears to be on course toward raising interest rates this year, likely this month. The Fed does not need more good data to justify taking action, it only needs to see that there aren’t any big negatives out there holding it back, which there haven’t been so far.
Rising copper and crude oil prices have lit a fire under resource currencies today. CAD is leading the charge ahead of today’s Canadian PMI report as traders continue to respond favourably to yesterday’s stronger than expected July GDP numbers. Speculation on further Bank of Canada rate cuts continues to fade with October off the table due to the election, and December unlikely if the economy continues to rebalance and the benefits of a lower loonie keep kicking in.
There have been no major corporate announcement this morning.
Significant announcements released overnight include:
US jobless claims 277K vs street 271K
NZ QV house prices 12.6% vs previous 11.3%
Japan Tankan large mfg 13 vs street 12 vs previous 15
Australia commodity index (21.3%) vs previous (20.9%)
Manufacturing PMI reports:
China official mfg 49.7 unchanged as expected
China official non-mfg 53.4 unchanged
China Caixin mfg 47.2 vs street 47.0
China Caixin service 50.5 vs previous 51.5
Australia 52.1 vs previous 51.7
51.0 vs previous 50.9
India 51.2 vs previous 52.3
Sweden 53.3 vs street 54.0
Poland 50 9 vs street 52.3
Norway 47.3 vs street 44.0
Spain 51.7 vs street 52.9
Italy 52.7 vs street 53.4
France 50.6 vs street 50.4
Germany 52.3 vs street 52.5
Greece 43.3 vs previous 39.1
Eurozone 52.0 as expected
UK 51.5 vs street 51.3
Upcoming significant announcements include:
10:00 am EDT US construction spending street 0.5%
10:30 am EDT US natural gas street 101 BCF
1:00 pm EDT FOMC Lockhart speaking
2:30 pm EDT FOMC Williams speaking
Upcoming Manufacturing PMI reports:
9:00 am EDT Singapore street 49.4
9:00 am EDT Singapore electronics sector street 48.8
9:30 am EDT Canada previous 49.4
9:45 am EDT US Markit street 53.0
10:00 am EDT US ISM street 50.6 vs previous 51.1
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