t’s been a very mixed day for trading across global markets. Ongoing Brexit and financial concerns continued to drag on GBP, EUR plus financials, UK and European stocks through the day while driving more capital into defensive havens like gold, JPY and bonds.
US stocks started the day lower but regained their footing and clawed their way into positive territory on the back of a much stronger than expected ISM non-manufacturing PMI report, a sign of a robust US economy and positive environment for corporate earnings. USD also picked up on the news which, if it wasn’t for Brexit uncertainty, would be seen as evidence supporting a US interest rate hike.
There weren’t any big surprises in the FOMC June minutes which showed the central bank confused about the meaning of last month’s soft nonfarm payrolls growth and concerned about the Brexit vote which had not been held at the time of the meeting.
The days since the Brexit vote had been light for economic news but we’re now heading into a busier time for economic and corporate news which may give traders more to sink their teeth into. Market action over the last two days shows us that currently traders are seeing good/hawkish news as positive for stocks and currencies with bad/dovish news being seen as negative for stocks and currencies.
As noted, the positive/hawkish US PMI news sent US stocks and USD higher. In contrast, yesterday’s dovish move at the Bank of England freeing up £150B in lending power for banks and today’s indication from Sweden’s Riksbank that the removal of negative interest rates is likely to be pushed out further have been accompanied by selloffs in GBP, EUR and stocks on both sides of the English Channel.
Fear trades which looked crowded in the morning appeared tired by the afternoon with a number of contracts reversing course a bit, particularly US stocks, gold and JPY. Crude oil also posted a strong bounce reversing part of yesterday's 5% decline with a 2% gain. Oil popped again late in the day on a massive 6.7 mmbbl drop in API inventories and may remain active through tomorrow's DOE inventory reports.
Focus now turns to the US, particularly Thursday's US ADP and Friday's nonfarm payrolls reports, with traders looking for whether last month's really low nonfarm number is an outlier or not. Jobless claims for the last two months plus last month's ADP report indicate a robust job market. This suggests nonfarm payrolls could be revised upward. It's also unclear if low job growth at this stage of the cycle would indicate a slowing economy or one nearing full employment.
There have been no major announcements after the US close today.
Significant announcements released overnight include:
US API crude oil inventories (6.7 mmbbls) vs street (2.5 mmbbls)
US ISM non-manfctrng PMI 56.5 vs street 53.3 and previous 52.9
US Markit service PMI 51.4 vs street 51.3
Canada trade balance ($3.3B) vs street ($2.7B)
US trade balance ($41.1B) vs street ($40.0B)
Sweden interest rate (0.50%) no change as expected
Poland interest rate 1.50% no change as expected
UK BRC Shop prices (2.0%) vs previous (1.8%)
Germany factory orders (0.2%) vs street 0.9%
Spain industrial output 1.0% vs street 2.2%
Germany construction PMI 50.4 vs previous 52.7
Germany retail PMI 51.6 vs previous 54.0
Italy retail PMI 40.2 vs previous 45.2
Sweden unemployment rate 3.8% vs previous 3.6%
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)
9:30 am AEST Australia construction PMI previous 46.7
8:30 am BST UK Halifax house prices street 7.8%
9:30 am BST UK industrial production street 0.5% vs previous 1.6%
9:30 am BST UK manufacturing production street 0.4% vs previous 0.8%
7:00 am BST Germany industrial production street 1.5%
9:00 am BST Norway industrial production previous 3.2%
10:00 am BST Greece unemployment rate previous 24.1%
12:30 pm BST ECB meeting minutes
8:15 am EDT US ADP Payrolls street 160K
8:15 am EDT US ADP payrolls revision previous 173K
8:30 am EDT US jobless claims street 267K
3:00 pm BST UK NIESR GDP estimate previous 0.5%
10:00 am EDT Canada Ivey PMI street 51.2 vs previous 49.4
10:30 am EDT US natural gas street 41 BCF
11:00 am EDT US DOE crude oil inventories street (2.5 mmbbls)
11:00 am EDT US DOE gasoline inventories street (0.2 mmbbls)
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