Market Roundup
• Dollar scales more than two-year high
• Traders see 91% chance of 25 bps Fed rate cut in Sept
• U.S. factory sector shrinks for first time since 2016
• Tech stocks weigh most on S&P 500
• Canada RBC Manufacturing PMI 49.1, 50.2 previous
• US Aug Manufacturing PMI 50.3, 49.9 forecast, 49.9 previous
• US Jul Construction Spending (MoM) 0.1%,0.3% forecast, -0.7% previous
• US Aug ISM Manufacturing Employment 47.4, 51.7 previous
• US Aug ISM Manufacturing New Orders Index 47.2, 50.8 previous
• US Aug ISM Manufacturing PMI 49.1, 51.1 forecast, 51.2 previous
• US Aug ISM Manufacturing Prices 46.0, 45.8 forecast, 45.1 previous
• New Zealand Global Dairy Trade Price Index -0.4%,-0.2% previous
Looking Ahead - Economic Data (GMT)
• 22:30 Australia Aug AIG Services Index 43.9 previous
• 23:00 Australia Services PMI 49.2 forecast , 52.3 previous
• 23:00 Japan Aug Services PMI 53.4 forecast, 51.8 previous
• 01:30 New Zealand ANZ Commodity Price Index (MoM) -1.4% previous
• 01:30 Australia GDP (YoY) (Q2) 1.4% forecast, 1.8% previous
• 01:30 Australia GDP (QoQ) (Q2) 0.5% forecast, 0.4% previous
• 01:30 Australia GDP Capital Expenditure (Q2) -0.7% previous
• China Aug Caixin Services PMI 51.6 previous
Looking Ahead - Events, Other Releases (GMT)
• 01:30 Japan BoJ Board Member Kataoka Speaks
• 14:30 Canada BoC Rate Statement
• 17:00 US FOMC Member Kashkari Speaks
Currency Summaries
EUR/USD: The euro fell to its weakest in more than two years against the dollar on Tuesday after a survey on Monday showed European manufacturing contracted for seven straight months, reinforcing expectations that the European Central Bank will ease monetary policy at a meeting next week. The euro fell to $1.0954 in Asia on Tuesday, its weakest since May 2017, with sentiment damaged by the break below the key $1.1000 level last week. The ECB’s Governing Council holds its next monetary policy meeting on Sept. 12 and has all but promised a stimulus package, with economic growth faltering amid a global trade war and Germany’s manufacturing sector already in recession. Market expectations are that it will carry out several interest rate cuts in the coming year, along with a fresh round of bond purchases, commonly known as quantitative easing. Immediate resistance can be seen at 1.0991 (5 DMA), an upside break can trigger rise towards 1.1045 (11 DMA).On the downside, immediate support is seen at 1.0924 (Daily low), a break below could take the pair towards 1.0900 (Psychological level).
GBP/USD: Sterling declined against greenback on Tuesday, as British lawmakers prepared to vote on the first stage of a plan to block Prime Minister Boris Johnson from pursuing a no-deal Brexit. Johnson’s opponents will put forward a vote that would enable them to seize control of the parliamentary agenda on Wednesday to try to pass legislation that would force Johnson to seek a three-month delay to Britain’s EU exit. Johnson has made it clear that if the government was defeated, it would hold a vote on Wednesday to approve an early election, most likely to be held on Oct. 14.Sterling fell 0.01% to $1.2084 in US trading on Tuesday, its biggest decline in more than three weeks. Immediate resistance can be seen at 1.2115 (5 DMA), an upside break can trigger rise towards 1.2174 (11 DMA).On the downside, immediate support is seen at 1.1957 (Daily low), a break below could take the pair towards 1.1900 (Psychological level).
USD/CAD: The Canadian dollar was little changed against the greenback on Tuesday, with the currency recovering from a two-month low hit earlier in the day on global economic worries as the focus shifted to this week's Bank of Canada interest rate decision. Money markets expect the Bank of Canada to leave its benchmark interest rate on hold at 1.75% on Wednesday but to ease by the end of the year. The central bank has worried about the risks trade wars pose to the global economy. Data on Tuesday showed that Canadian manufacturing activity slowed in August as new work received by firms slumped to the lowest level in nearly four years, pressured by trade tensions between the United States and China and global economic uncertainty. Immediate resistance can be seen at 1.3384 (Sep 3rd high), an upside break can trigger rise towards 1.3400 (Psychological level).On the downside, immediate support is seen at 1.3298 (11 DMA), a break below could take the pair towards 1.3285 (21 DMA).
USD/JPY: The dollar edged higher against Japanese yen on Tuesday, as traders favored the greenback on worries about U.S.-China trade tensions and a chaotic British exit from the European Union.The dollar's initial gains abated in the wake of a private report that showed the U.S. manufacturing sector recorded its first monthly contraction since 2016 in August. Last month's steeper-than-expected decline in the factory activity index from Institute for Supply Management also touched off a rally in the U.S. bond market, sending benchmark 10-year yields to their lowest levels since July 2016.The dollar was 0.03 percent higher versus the Japanese yen at 105.95. Strong resistance can be seen at 106.12 (21 DMA), an upside break can trigger rise towards 107.80 (50 DMA).On the downside, immediate support is seen at 105.75 (Sep 3rd low), a break below could take the pair towards 105.00 (Psychological level).
Equities Recap
European shares retreated from a 1-month high on Tuesday as weak U.S. factory data added to worries about global growth, while uncertainty over Britain’s chaotic exit from the European Union knocked the FTSE 100 lower after a four-day run of gains.
The UK's benchmark FTSE 100 closed down by 0.19 percent, Germany's Dax ended down by 0.36 percent, and France’s CAC finished the down by 0.49 percent.
U.S. stocks fell on Tuesday as data showed factory activity contracted for the first time since 2016 in August, renewing fears that a drawn-out trade war between the United States and China could tip the world’s largest economy into recession.
Dow Jones closed down by 1.08 percent, S&P 500 ended down 0.69 percent, Nasdaq finished the day down by 1.11 percent.
Treasuries Recap
U.S. Treasury yields fell on Tuesday, with the benchmark 10-year yield hitting its lowest since July 2016, after U.S. manufacturing data showed the first contraction since 2016 on worries about a weakening global economy and U.S.-China trade tensions.
The 30-year Treasury yield fell to 1.9612%, near the historic low of 1.9050% hit on Aug. 28. The 30-year interest swap rate fell to a record low of 1.4762% on Tuesday after closing at 1.54% on Friday.
Commodities Recap
Gold rose more than 1% on Tuesday after weak manufacturing data from the United States reinforced fears of an economic downturn, while uncertainties over U.S.-China trade ties and Brexit further boosted bullion’s safe-haven appeal.
Spot gold rose 1% to $1,546.30 per ounce at 1:35 p.m. EDT (1734 GMT), not far off its more than six-year high of $1,554.56.U.S. gold futures settled up 1.7% to $1,555.90.
Oil prices fell on Tuesday, with U.S. crude futures down 2% after manufacturing data raised concerns about a weakening global economy, while the U.S.-China trade dispute continued to drag on investor sentiment.
U.S. West Texas Intermediate (WTI) crude futures fell $1.16, or 2.1%, to settle at $53.94 a barrel. The session low was $52.84 a barrel, the lowest since Aug. 9.
Brent crude futures lost 40 cents, or 0.7%, to settle at $58.26 a barrel. It sank as low as $57.23 a barrel, also the weakest since Aug. 9.
