Market Roundup
• U.S.-Canada trade talks restart, tackle 'final' issues.
• Bank of Canada hints it could hike rates even if NAFTA collapses.
• IMF aims for quick conclusion to Argentina talks, peso climbs.
• NY Fed's Williams says economy "as good as it gets" for U.S. central bank.
• US 1 Sep w/e Initial Jobless Claims, 203K, 213K previous, 214K forecast.
• US 1 Sep w/e Jobless Claims 4 Week- Avrg, 209.50K, 212.25K previous.
• US 25 Aug w/e Continued Jobless Claims, 1.707M, 1.708M previous, 1.710M forecast, 1.710M revised.
• US Jul Factory Orders m/m, -0.8%, 0.7% previous, -0.6% forecast.
• US Aug Challenger Layoffs, 38.472K, 27.122k previous.
• US Aug ADP National Employment, 163K, 219K previous, 190K forecast, 217K revised.
• US Q2 Labour Costs Revised, -1.0%, -0.9% previous, -0.9% forecast.
• US Q2 Productivity Revised, 2.9%, 2.9% previous, 3.0% forecast.
• US Aug Markit Composite Final PMI, 54.7, 55.0 previous.
• US Aug ISM N-Mfg PMI, 58.5, 55.7 previous, 56.8 forecast.
• CA Jul Building Permits m/m,-0.1%, -2.3% previous, 1.3% forecast, -1.3% revised.
Looking Ahead - Economic Data (GMT)
• 6 Sep 22:30 Australia Aug AIG Construction Index, 52.0 previous
• 6 Sep 23:30 Japan Jul All Household Spending change y/y, -1.2% previous, -0.9% forecast
• 7 Sep N/A China Aug FX Reserves monthly, 3.118T previous, 3.111T forecast
• 7 Sep 01:30 Australia Jul Housing Finance, -1.1% previous, 0.0% forecast
• 7 Sep 03:00 New Zealand Aug Reserve Assets Total, 29,855M previous
Looking Ahead - Events, Other Releases (GMT)
• N/A Chair of the Supervisory Board Daniele Nouy, ECB Vice-President Luis de Guindos and ECB's Executive Board member Benoit Coeur participate in an informal ECOFIN meeting in Vienna.
• 07:00 Eurogroup meeting in Vienna.
• 12:30 Boston Fed's President Eric Rosengren gives a speech entitled "What Are the Consequences of Long Spells of Low Interest Rates?" in Boston.
• 13:00 Cleveland Fed's President Loretta J. Mester moderates "Reality Check from the Markets: A Panel Discussion" at the Federal Reserve Bank of Boston's 62nd Economic Conference in Boston.
• 17:20 Dallas Fed's President Robert Kaplan participates in moderated question-and-answer session in Dallas.
Currency Summaries
EUR/USD is likely to find support at 1.1553 levels and currently trading at 1.1621 levels. The pair has made session high at 1.1646 and hit lows at 1.1603 levels. The euro was little changed against the U.S. dollar on Thursday as investors positioned themselves ahead of Friday’s highly anticipated jobs report for August. The dollar also came under pressure as investors sought the yen and the Swiss franc amid worries about new U.S. trade tariffs on China cast a cloud over the market. Trump could impose levies on $200 billion more of Chinese imports on Thursday when a public comment period on the new tariffs ends. That would represent a significant ramping up of the trade war between the world's two largest economies. On Thursday, the ADP National Employment Report showed private payrolls increased by 163,000 jobs last month. Economists polled by Reuters had forecast private payrolls increasing by 190,000 jobs last month. Other data showed that the number of Americans filing for unemployment benefits fell to near a 49-year low last week. Markets will closely watch a U.S. employment report due on Friday for clues about the pace of interest rate increases by the Federal Reserve. The dollar index, which measures the greenback against a basket of six currencies, was down 0.13 percent at 95.061. The index hit a two-week high on Tuesday.
GBP/USD is supported in the range of 1.2852 levels and currently trading at 1.2922 levels. It reached session high at 1.2962 and dropped to session low at 1.2908 levels. Britain's pound gained against the dollar on Thursday but remained well below highs hit in the previous session due to uncertainty over the progress of the Brexit negotiations, while broader concerns over trade wars kept a lid on risk appetite. Overnight news reports that German Chancellor Angela Merkel's government is preparing for all Brexit scenarios, including a no-deal, weighed on sentiment on Thursday. Irish Prime Minister Leo Varadkar said on Thursday Dublin had not received any indication of "dramatic moves" by either side towards progress in the Brexit talks. The British currency remains one of the most shorted among major currencies, along with the yen and the Swedish crown, and any slightly positive headline on the progress of the Brexit negotiations tends to elicit a big market reaction. As a result, more investors are wary of shorting the currency aggressively. The British currency drifted 0.3 percent higher to $1.2926 but remained below a three-day high of $1.2983 hit in the previous session. Against the euro, it rose by a quarter of a percent to 89.97 pence.
USD/CAD is supported at 1.3088 levels and is trading at 1.3138 levels. It has made session high at 1.3224 and lows at 1.3128 levels. The Canadian dollar strengthened against the greenback on Thursday, recovering from a nearly seven-week low earlier in the day after a senior Bank of Canada official said the central bank had discussed the pace at which it could raise interest rates. The central bank discussed whether the gradual approach to raising rates that it has been taking over the past year remained appropriate, Bank of Canada Senior Deputy Governor Carolyn Wilkins said in a speech. Wilkins indicated the central bank may be forced to raise interest rates if talks to renegotiate the North American Free Trade Agreement fail, saying protectionist measures could spur inflation. The loonie had been pressured by the prospect of an escalation in a trade dispute between the United States and China, with U.S. President Donald Trump gearing up to impose tariffs on $200 billion in Chinese goods and Beijing certain to retaliate against any measuresThe price of oil, one of Canada's major exports, was boosted by a weaker U.S. dollar and evidence of strong U.S. fuel demand. U.S. crude oil futures were up 0.3 percent at $68.95 a barrel. The Canadian dollar was trading 0.3 percent higher at C$1.3139 to the greenback, or 76.11 U.S. cents. The currency's strongest level of the session was C$1.3128, while it touched its weakest since July 20 at C$1.3226.
AUD/USD is supported around 0.7142 levels and currently trading at 0.7197 levels. It hit session high at 0.7383 and made session lows at 0.7210 levels. The Australian dollar dipped against its U.S. counterpart on Thursday after two more major local banks announced rises in mortgage rates, a move that could add to downward pressure on home prices and push out any hike in official interest rates. The increases were only modest but with home prices already under water across much of the country any lift in borrowing costs could weigh on housing demand. That risk will only add to the case against a hike in rates from the Reserve Bank of Australia (RBA), which just this week emphasised that any move was some way away. Investors reacted by shoving the Aussie dollar down a quarter of a cent to $0.7195, and back toward the recent 20-month trough of $0.7145. Adding to the angst was uncertainty about whether and when U.S. President Donald Trump might act on a threat to impose tariffs on another $200 billion of Chinese goods. Trump on Wednesday said that the United States was not yet ready to come to an agreement with China but that talks would continue.
Equities Recap
European shares dropped to their lowest level in five months on Thursday as worries over trade weighed and tech stocks came under pressure.
The UK's benchmark FTSE 100 closed down by 1 percent, FTSEurofirst 300 ended the day down by 0.49 percent, Germany's Dax ended down by 0.7 percent, and France’s CAC finished the down by 0.2 percent.
The S&P 500 and Nasdaq declined on Thursday as the possibility of more U.S. tariffs on Chinese imports loomed and as tech stocks stumbled on warnings from chipmakers and concerns about increased regulation of social media companies.
Dow Jones closed up by 0.09 percent, S&P 500 ended down 0.36 percent, Nasdaq finished the day down by 0.90 percent.
Treasuries Recap
U.S. Treasury yields fell on Thursday on safety buying as stocks dropped and as investors saw recent weakness in bonds driven by heavy corporate issuance as an opportunity to add positions at higher yields.
Benchmark 10-year notes rose 8/32 in price to yield 2.873 percent, down from 2.902 percent on Wednesday.
Commodities Recap
Gold clawed higher on Thursday, propelled by a weaker dollar, short-covering and physical buying in Asia.
Spot gold gained 0.3 percent at $1,199.68 per ounce by 1:54 p.m. EDT (1754 GMT), after rising 0.5 percent in the previous session.
U.S. gold futures futures for December delivery settled up $3, or 0.3 percent, at $1,204.30 per ounce.
Crude futures reversed course, falling more 1 percent on Thursday after U.S. data showed gasoline inventories rose unexpectedly last week, overshadowing a bullish drawdown in crude.
U.S. West Texas Intermediate (WTI) crude futures fell 95 cents to settle at $67.77 a barrel, a 1.3 percent loss. Brent crude futures lost 77 cents to trade at $76.50 a barrel, a 1 percent loss.
