US stocks were unable to keep the party going today, turning lower as the recent rally ran out of gas. Some scepticism appears to have crept in as the day progresses about whether recent big gains like yesterday’s 7.7% rally in the Nikkei
are the start of a recovery or if they are just bear market bounces.
Another factor impacting US trading today may also be renewed speculation that the Fed could be about to start raising interest rates. Today’s JOLTS job openings report was way above expectations, indicating a healthy US employment market. Also, with Chinese stock markets starting to rebound and signs the government is preparing to support the economy through fiscal measures, the crisis phase may be passing into history. If the rebound continues, another roadblock to rate liftoff may recede.
Today’s selloffs in gold and commodities like crude oil also suggest expectations for a stronger USD based on rising interest rates. After starting out strong after the Bank of Canada held interest rates steady and shifted its stance from dovish to neutral, CAD drifted lower, unable to totally shrug off the effects of falling oil prices.
Seasonal factors may also still be at work. We’re still moving through the weakest time of the year for stocks. Although Chinese indices recently completed double bottoms, markets in Europe and North America could still retest their August lows in the coming weeks. The response to today’s flurry of product announcements that included enhancements or new versions of the Apple Watch, iPad Pro (plus keyboard and stylus), Apple TV and iPhone 6s met with a clear lack of enthusiasm from the market with traders sending the stock lower as the event progressed.
Today looks like it could be another active one for Asia Pacific markets.
Things kick off with the latest RBNZ decision. After raising interest rates four times last year, the RBNZ cut rates at its last two meetings, is expected to cut by 0.25% this week and to finish giving it all back at its next meeting. In the last month, New Zealand, PMI, trade, retail sales and other data have been soft, so there’s no reason to think it won’t keep cutting back toward 2.50% over the next two meetings. That being said, NZD has been rallying over the last 24 hours so some people appear to be anticipating that they may not cut, or may hint that they are done cutting after this meetings.
After a big decline, NZD has been stabilizing of late along with commodity prices and has been climbing ahead of the meeting. A 0.25% cut may not have much impact. A decision to go on hold could be seen as hawkish and spark a bigger rebound while a surprise 0.50% increase could get traders wondering how poor New Zealand economic conditions are which could send the kiwi dollar down sharply. Comments (or lack of comments) related to Kiwi Dollar valuation could also influence trading activity in NZD pairs.
Chinese inflation figures may keep China markets hopping as it may give an indication of how much pressure the PBOC may come under to go even more dovish and cut interest rates further. We’ve also learned to expect the unexpected lately, so traders may also be looking for any additional signs of potential government support.
Australia jobs are also due today. AUD has been drifting downward over the last few hours into the news, indicating traders are expecting a retrenchment after last month’s sizeable gains. Last week’s Canada job growth suggests the potential for a positive surprise if Australia starts to see the benefits of a lower AUD working through the system but this could have been offset by recent financial market turmoil in China. This news could have a significant impact on AUD as it could kick off another round of speculation on whether the RBA may cut interest rates again next month or not.
There have been no major corporate announcements after the US close today.
Significant announcements released overnight include:
Canada interest rate 0.50% no change as expected
US JOLTS job openings 5753K vs street 5300K
Canada housing starts 217K street 190K
Canada building permits (0.6%) vs street (5.0%)
UK BRC shop prices (1.4%) vs street (0.2%)
UK industrial production 0.8% vs street 1.4%
UK manufacturing production (0.5%) vs street 0.5%
UK trade balance (£3.3B) vs street (£1.9B)
UK NIESR GDP estimate 0.5% vs previous 0.7%
Greece industrial production (1.6%) vs street (7 5%)
Greece consumer prices (1.5%) vs street (1.9%)
Upcoming significant announcements include:
9:00 am NZST Thu NZ interest rate 0.25% cut to 2.75% expected
5:00 pm EDT Wed
9:50 am AEST Japan machine orders street 10.3%
9:50 am AEST Japan producer prices street (3.3%)
11:30 am AEST China consumer prices street 1.8%
11:30 am AEST China producer prices street (5.6%)
11:30 am AEST Australia employment change street 5K vs previous 38K
11:30 am AEST Australia full-time jobs previous 12K
11:30 am AEST Australia part-time jobs previous 26K
11:30 am AEST Australia unemployment rate street 6.2%
7:45 am BST France industrial production street 0.7%
8:00 am BST UK Halifax house prices street 7.9%
8:30 am BST Sweden consumer prices street (0.1%)
9:00 am BST Norway consumer prices street 1.8%
10:00 am BST Greece unemployment rate street 24.8%
12:00 pm BST UK interest rate and QE 0.50% and £375B no change expected
8:30 am EDT US jobless claims street 275K
8:30 am EDT Canada new house prices street 1.3%
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