Market Roundup
• US Sep ADP National Employment, 230K, 185K forecast, 163K previous, 168K revised.
• US Sep Markit Comp Final PMI, 53.9, 53.4 previous.
• US Sep Markit Svcs PMI Final, 53.5, 52.9 previous.
• US Sep ISM N-Mfg PMI, 61.6, 58.0 forecast, 58.5 previous.
• US Sep ISM N-Mfg Bus Act, 65.2, 60.3 forecast , 60.7 previous.
• US Sep ISM N-Mfg Employment Idx, 62.4, 56.7 previous.
• US Sep ISM N-Mfg New Orders Idx, 61.6, 60.4 previous.
• US Sep ISM N-Mfg Price Paid Idx, 64.2, 62.8 previous.
• US 28 Sep w/e Mortgage Refinance Index, 945.9, 946.8 previous.
• US 28 Sep w/e MBA 30-Yr Mortgage Rate, 4.96%, 4.97% previous.
• Fed's Evans says comfortable with a December rate hike.
• With rates on the rise, Fed must plan for next downturn, Evans says.
• Inflation expectations haven't gone up as much as wanted - Fed's Evans.
• Fed's Barkin cites Brexit, political crisis as potential economic shocks.
• Fed's Harker says U.S. economic divisions must be addressed.
• Italy to cut deficit from 2020, provides relief to markets.
• High-interest debt issuance boosts Argentina's peso for third day.
• Brazil markets soar as right-wing candidate gains steam.
• CA Sep Reserve Assets Total, 80,683M, 81,238M previous
Looking Ahead - Economic Data (GMT)
• 3 Oct 23:50 Japan 29 Sep w/e Foreign Bond Investment, 1,505.0B previous
• 3 Oct 23:50 Japan 29 Sep w/e Foreign Invest JP Stock, -519.8B previous
• 4 Oct 01:00 Australia Oct HIA New Home Sales m/m SA, -6.1% previous
• 4 Oct 01:30 Australia Aug Trade Balance G&S (A$), 1,551M previous, 1,400M forecast
• 4 Oct 01:30 Australia Aug Goods/Services Imports, 0% previous
• 4 Oct 01:30 Australia Aug Goods/Services Exports, -1% previous
Looking Ahead - Events, Other Releases (GMT)
• Oct 3 N/A Federal Reserve Banks of Philadelphia and Richmond co-sponsored conference "Reinventing Our Communities: Investing in Opportunity."
• Oct 4 00:00 Federal Reserve Bank of Dallas President Robert Kaplan gives lecture at an event hosted by the Kansas University School of Business in Lawrence, Kansas.
• Oct 4 06:00 International Monetary Fund Managing Director Christine Lagarde holds a news conference in Tokyo.
• Oct 4 07:00 ECB policymaker Ewald Nowotny speaks at financial markets conference in Vienna.
• Oct 4 08:00 ECB Council Member, Bank of Finland Governor Olli Rehn is due to hold a news conference about monetary policy and global economic situation.
• Oct 4 09:30 Keynote speech at a conference by ECB Supervisory Chief Daniele Nouy in Vienna, Austria
• Oct 4 13:15 Federal Reserve Vice Chair for Supervision Randal Quarles speaks before the conference hosted by the Federal Reserve Bank of St. Louis, in St. Louis, Mo..
• Oct 4 14:30 Bank of Canada Governor Stephen Poloz speaks on topics including monetary policy in Canada at Canadian Foundation for Economic Education & Bank of Canada Museum in Ottawa.
• Oct 4 16:00 ECB Executive Board Member Benoit Coeure speaks at a local French business community in Chateaudun, France.
Currency Summaries
EUR/USD is likely to find support at 1.1450 levels and currently trading at 1.1477 levels. The pair has made session high at 1.1547 and hit lows at 1.1464 levels. The euro declined against dollar on Wednesday as data supported the view that the U.S. economy is in strong shape and as concerns about Italy’s budget negotiations continued to weigh on the euro. U.S. services sector activity raced to a 21-year high in September and companies boosted hiring, signs of enduring strength in the economy at the end of the third quarter. Private employers added 230,000 jobs in September, the most since February, according to the ADP National Employment Report on Wednesday. That was more than economists’ expectations of 185,000 jobs. Powell on Tuesday hailed a "remarkably positive outlook" for the U.S. economy that he feels is on the verge of a "historically rare" era of ultra-low unemployment and tame prices. The Fed last Wednesday raised interest rates as expected and said it foresees another rate hike in December, three more next year and one in 2020. The dollar is outperforming as U.S. growth remains strong while economic data in other large economies including the eurozone has come in below expectations. The euro was hurt by uncertainty surrounding Italy's debt, fiscal plans and future ties with Europe, which have unnerved markets and exacerbated tensions with other eurozone leaders.
GBP/USD is supported in the range of 1.2900 levels and currently trading at 1.2947 levels. It reached session high at 1.3022 and dropped to session low at 1.2922 levels. Sterling declined towards a three-week low against dollar on Wednesday as Prime Minister Theresa May defended her plans for Brexit, although the currency's moves were limited as analysts said they saw little in her speech that was new. May said she was confident Britain could agree a deal for its exit from the European Union, although she said she would rather leave without a deal than accept the carve up of the United Kingdom. Sterling was weaker before May delivered her annual speech to the Conservative Party conference, but it did briefly slip further after she pledged to stick with her Brexit plans as Britain and the EU enter another round of negotiations to decide their split. The pound dropped the day to as low as $1.2922 before recovering to trade down 0.2 percent at $1.2950.Sterling was unmoved versus the euro at 88.995 pence during May's speech but later rallied 0.4 percent to 88.67 pence, pushed higher by a broad weakening in the single currency. The currency has been hit hard by concerns over a growing conflict within her party over May's Brexit plan with the pound falling to its lowest since Sept. 10 in the previous session.
USD/CAD is supported at 1.2783 levels and is trading at 1.2870 levels. It has made session high at 1.2881 and lows at 1.2817 levels. The Canadian dollar weakened against its U.S. counterpart on Wednesday as comments by a top U.S. policymaker boosted the greenback, but the loonie clung to most of the gains that followed a deal over the weekend to revamp the NAFTA trade pact. The U.S. dollar strengthened against other major currencies after Federal Reserve policymaker Charles Evans said inflation expectations have not gone up as much as he would have liked and he was comfortable with a December interest rate hike. The Bank of Canada is also expected to tighten further after a deal to salvage the trilateral North American Free Trade Agreement reduced uncertainty for Canada's trade-dependent economy. Still, China's hopes of negotiating a free trade pact with Canada or Mexico were dealt a sharp setback by a provision deep in the new U.S.-Mexico-Canada trade agreement that aims to forbid such deals with "non-market" countries, trade experts said on Tuesday. The Canadian dollar was trading 0.2 percent lower at 1.2869 to the greenback, strongest level in more than four months at 1.2783, traded in a narrow range between 1.2808 and 1.2884.
USD/JPY is supported around 110.87 levels and currently trading at 111.46 levels. It peaked to hit session high at 111.51 and made session lows at 111.13 levels. The dollar gained against the Japanese yen on Wednesday as stronger dollar and concerns surrounding Italy's plans to tackle budgetary deficit weighed on safe heaven yen. Safe heaven was hit after European Union (EU) officials expressed concerns about Italy's budget plan, which would widen the deficit significantly. The deficit blowout revived fears of the eurozone debt crisis. The U.S. dollar also gained after the release of the US economic data. The Institute for Supply Management (ISM) said its non-manufacturing activity index jumped 3.1 points to 61.6 last month, the highest reading since August 1997. The survey's factory employment measure rose to 62.4 in September from 56.7 in August. This suggests September's nonfarm payrolls could surprise on the upside when the government publishes its more comprehensive employment report on Friday. Private payrolls rose by 230,000 jobs in September, the largest gain since February, the ADP National Employment Report showed, after an upwardly revised 168,000 increase in August.
Equities Recap
Italian stocks turned from a drag into a boost for European markets on Wednesday as signs the government would target a lower budget deficit quelled investors' fears of a damaging showdown with the European Commission.
The UK's benchmark FTSE 100 closed up 0.7 percent, FTSEurofirst 300 ended the day up by 0.61percent, Germany's Dax ended down by 1.1 percent, and France’s CAC finished the up by 2 percent.
Wall Street advanced on Wednesday and the Dow Jones Industrial Average closed at a record for a second day, after U.S. economic data fueled a rise in Treasury yields, lifting financial stocks..
Dow Jones closed up by 0.20 percent, S&P 500 ended up 0.05 percent, Nasdaq finished the day up by 0.30 percent.
Treasuries Recap
U.S. Treasury yields reached multiyear peaks, with the 10-year note's yield at its highest since 2014 and maturities at the short end of the curve at decade highs, after economic data on Wednesday bolstered the case for the Federal Reserve to raise rates in December and beyond.
The yield on the 2-year note, which reflects market expectations of interest rate hikes, rose to 2.868 percent, its highest since June 2008, when it topped 3 percent. Yields on the 3- and 5-year notes rose to their highest since December 2007 and October 2008, respectively.
Commodities Recap
Gold eased on Wednesday after the Italian government indicated it was open to trimming its budget deficit and debt, soothing investors' nerves and prompting a wider move back into stocks and other higher-risk assets.
Spot gold was down 0.3 percent at $1,199.56 per ounce by 1:47 p.m. EDT (1747 GMT), after it touched an over one-week high of $1,208.32 earlier in the session.
U.S. gold futures for December delivery settled down $4.10, or 0.34 percent, at $1,202.90 per ounce.
Brent crude rose nearly 2 percent after hitting a four-year high on Wednesday as the market focused on upcoming U.S. sanctions on Iran while shrugging off the year's largest weekly build in U.S. crude stockpiles and reports of higher Saudi Arabian and Russian production.
Brent crude rose $1.49, or 1.8 percent, to settle at $86.29 a barrel, after hitting $86.74, its highest since Oct. 30, 2014. U.S. crude settled $1.18, or 1.6 percent, higher at $76.41 a barrel, after touching a session high of $76.90.
