Welcome to my daily Markets Musings.
You’ll see things are different from now on. That’s because the full note was approaching 2,000 words some days and I’m breaking it up into a number of reports on the Axi Blog each day now.
That way traders can subscribe to the Axi Blog easily and then cherry pick the yarns and markets of interest
Feedback always welcome
Market Summary (8am Wednesday September 5)
Stocks are off, rates are a little higher, and the USD is again on the move. That’s the short summary of overnight trade as the ISM manufacturing PMI shot the lights out with a print of 61.3 against expectations of 57.7. It’s a number that spoke to economic strength, supply chain pressures, and hiring shortages.
Last night we also saw the Atlanta Fed upgrade its GDPNowcast for Q3 GDP to 4.7%. US 2’s are at 2.65%, the 10’s are at 2,90%, and the curve is at 24.5 points rounded.
So the US dollar is a little stronger this morning with Euro down 0.3% at 1.1581, USDJPY is up by a similar amount to 111.39, while the Pound lost just 0.1% to 1.2856. The commodity bloc was under more pressure though. The Kiwi and CAD have lost about 0.65% each with USDCAD breaking out as trade tensions weigh. They sit at 0.6555 and 1.3172 respectively. The Aussie is also lower by 0.4% as copper dips again and as the USD pushes higher – AUDUSD is at 0.7181. It’s done half okay I think because Q2 GDP today is expected to be reasonable at 0.7% qoq and 2.8% over the past year.
The main currency game again however is EM markets. Argentina, despite a pledge of support from President Trump, saw the peso slide another 3% with USDARS at 38.90, The South African rand fell 3.3% after GDP growth was unexpectedly appaling and as the nation slipped into recession – USDZAR is at 15.32. The Colombian and Chilean pesos both lost around 1.3%, the Indian rupee is off half a percent, the Indonesian rupiah 0.8% lower, and the Mexican peso has lost 1.1% with USDMXN at 19.40. Can we say contagion yet – oh and the Turkish lira lost another 0.6% to 6.68 while the Iranian rial just keeps plumbing new lows.
No wonder Bitcoin is strong at $7,345 – up 0.4%.
To stocks then and there’s been a negative reaction the the Nike/Colin Kaepernick deal with the shares sliding last night. Tech came under a bit of selling too though Amazon joined Apple in the winner takes all trillion dollar club. Anyway, at the close the S&P was off the mat with a loss of just 0.16%, 5 points, to 2,896. The Dow ended up losing just 0.05% to 25,952, while the Nasdaq 100 was down 0.42% (same for the Russell 2000) at 7,622.
In Europe it was an ugly night with the DAX losing 1.1%, the CAC dropped 1.3% and the FTSE 100 lost 0.62%. So much for the weaker pound effect. And the weaker AUDUSD effect seems to be lost on SPI traders this morning who have knocked another 19 points after yesterday’s 18 point loss. Metals and mining are underperforming again and it was a sea of red on base metals so maybe this isn’t a big enough discount.
Speaking of base metals, copper lost 2.49% to $2.58 in HGc1 terms last night while most other base metals were down in Shanghai and London trade. It all fits the EM, growth, market funk narrative folks. US stocks are just not getting the message – or, more correctly that’s actually the safe haven right now. Anyway, Gold lost 0.75% to $1191, silver was belted close to 2.5%, and oil back off the resistance I’ve been talking about again overnight. WTI is at $69.33, down 0.7% and Brent is at $77.77, down half a percent.
On the day Australia’s Q2 GDP is the key event here at home with expectations of solid growth high. It’s also services and by extension composite PMI day around the globe. China will be important this morning, but so too Europe, Japan, Korea and EM economies. Retail sales in Europe are out tonight along with US and Canadian trade data before the big one with the release of the Bank of Canada’s interest rate decision. I’m expecting governor Poloz and his colleagues to keep rates at 1.5%.
Macro Stuff that affects everyone and everything – either today or eventually
Have a great day's trading.
Chief Market Strategist
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Soaring US yields trigger the wrecking ball effect as yields become a source of volatility for risk, rather than a source of support