Market Roundup
• US ISM services index falls by most since 2008 financial crisis to 51.4 from 55.5 in July.
• US ISM Aug Non-Mfg new orders 51.3 v 60.3 previous, prices paid 51.8 v 51.9 previous.
• Fed’s Lacker: Fed’s governance structure still effective (DJ).
• Fed’s George: US remains confident in decentralized Fed governance structure (DJ).
• Fonterra's GDT Price Index climbed 7.7%, with an average selling price of NZD2,920 per tonne, volume -2.7%.
• GBP surges above 1.34 for 1st time since mid-July, Weak US economic data sinks USD broadly.
• Euro Zone yields were 5-7 bps lower as investors speculated that the ECB may extend its 1.7 trillion QE programme and increase the pool of eligible bonds at Thursday's policy meeting.
• Iran gives cautious nod to oil deal as bargaining starts, Iranian output close to pre-sanctions levels.
• Gold extends gains after U.S. data, rate rise prospects pushed back, Silver hits more than 2-wk high.
• Blackrock Strategist Turnill: Extension of March end point for ECB's QE program more likely.
Looking Ahead - Economic Data (GMT)
• 22:45 New Zealand Manufacturing Sales* Q2 -1.2%- previous
• 23:30 Australia AIG Construction Index Aug 51.6- previous
• 01:30 Australia GDP QQ* Q2 forecast 0.6%, 1.1%- previous
• 01:30 Australia GDP YY* Q2 forecast 0.034, 3.1%- previous
• 01:30 Australia GDP Capital Expenditure* Q2 -1.7%- previous
• 01:30 Australia GDP Chain Price Index* Q2 -0.4%- previous
• 05:00 Japan Coincident Indicator MM* Jul -1.5-previous
• 05:00 Japan Leading Indicator* Jul 0-previous
• __:__ China FX Reserves (Monthly)* Aug forecast 3.19trillion, 3.20 trillion -previous
Looking Ahead - Events, Other Releases (GMT)
• No Significant Events
Currency Summaries
EUR/USD is supported at 1.1180 levels and currently trading at 1.1247 levels. The pair has made session high at 1.1262 and hit lows at 1.1153 levels. Euro rose against the dollar on Tuesday after data showed the U.S. service sector grew at its slowest pace since early 2010, which dimmed expectations for a near-term interest rate increase from the Federal Reserve. The Institute for Supply Management's non-manufacturing purchasing managers' index fell to 51.4 last month, far short of economists' expectations and the largest one-month drop since November 2008. Comments from several Fed officials in recent weeks had increased the probability for a rate hike this year, but expectations have declined since Friday's weaker-than-anticipated U.S. payrolls report. Friday's U.S. non-farm payrolls report showed employers in the United States added 151,000 jobs last month, missing economists' expectations and falling well below readings in June and July, which both showed more than 250,000 jobs added in each month. The euro rose to $1.1255, its highest since Aug. 26 after the data. Meanwhile, the dollar index dropped 1 percent to 94.821, it’s lowest since Aug. 26.
GBP/USD is supported in the range of 1.3370 levels and currently trading at 1.3424 levels. It reached session high at 1.5656 and dropped to session low at 1.3340 levels. Sterling surged higher against the dollar on Tuesday, after data showed the U.S. services sector fell well short of expectations and the view that Britain economy is recovering after a much-feared recession following its vote to leave the EU. A run of upbeat data has shown the economy holding up relatively well in the months following the June 23 referendum on the UK's membership of the European Union, such as Monday's purchasing managers' index survey of Britain's huge services sector. Sterling rose by more than 1 percent to hit a seven-week high of $1.3444 after data showed the U.S. economy's service sector expanded in August but at a slower pace than in July, and the fall from the previous month was the largest since the 2008 financial crisis.
USD/CAD is likely to find support at 1.2800 levels and is trading at 1.2843 levels. It has made intraday high at 1.3445 and lows at 1.2826 levels. The Canadian dollar rose against US dollar on Friday after weaker-than-expected US economic data bolstered views that Federal Reserve may decide against raising interest rates in the near term. The loonie has strengthened since data on Friday showed that exports jumped by 3.4 percent in July, while a slowdown in U.S. employment growth could rule out a rate increase from the Federal Reserve this month. Oil fell on receding hopes for imminent action to tackle a global supply glut. U.S. crude prices were down 0.8 percent at $47.26 a barrel. The Canadian dollar was last trading at C$1.2840 to the greenback, stronger than Monday's close of C$1.2930. Canada's August employment report is due on Friday. Investors will be looking to see whether the labor market can recover some of the 31,200 jobs it unexpectedly lost the month before.
AUD/USD is supported around 0.7614 levels and currently trading at 0.7682 levels. It hit session high at 0.7684 and made session lows at 0.7614 levels. The Australian dollar surged higher against US dollar on Tuesday after downbeat US economic data combined upbeat domestic data supported Aussie bulls. Data showed Australia's current account deficit came in at A$15.5 billion ($11.8 billion) last quarter compared with expectations of A$19.75 billion, after a big downward revision to the previous quarter's shortfall. The Australian dollar jumped 1.3 percent against the greenback after the data. The Aussie was also bolstered by the Reserve Bank of Australia's decision to leave interest rates unchanged at 1.5 percent and minimal commentary from the central bank on the currency's 10 percent rise against the U.S. dollar since January. The upbeat data also reinforced expectations the Reserve Bank of Australia would hold rates at 1.50 percent at its monthly meeting on Tuesday.
Equities Recap
European shares fell on Tuesday, dropping back from their highest levels since January, hit by weak U.S. data and a slump in France's Ingenico Group , which led Europe's tech sector.
UK's benchmark FTSE 100 closed down by 0.9 percent, the pan-European FTSEurofirst 300 ended the day down by 0.41 percent, Germany's Dax ended up by 0.1 percent, France’s CAC finished the day down by 0.3 percent.
U.S. stocks edged higher on Tuesday as economic data bolstered views the Federal Reserve may decide against raising interest rates in the near term.
Dow Jones closed up by 0.25 percent, S&P 500 ended up by 0.29 percent, Nasdaq finished the day up by 0.47 percent.
Treasuries Recap
U.S. Treasury yields fell across the board on Tuesday, with most maturities falling to two-week lows, after a weaker-than-expected reading of a U.S. services sector index for August diminished expectations the Federal Reserve will raise interest rates when it meets next week.
The benchmark 10-year Treasury notes were up 16/32 in price to yield 1.540 percent, from 1.597 percent on Friday. Yields fell as low as 1.536 percent, their weakest since Aug. 26.
The 30-year Treasury bond rose 31/32 in price to yield 2.226 percent, from 2.272 percent late on Friday. Yields earlier slid to a two-week low of 2.223 percent.
Two-year notes were up 3/32 in price to yield 0.738 percent, from Friday's 0.794 percent.
Commodities Recap
Gold prices rose nearly 2 percent on Tuesday, the biggest percentage gain since June, as disappointing U.S. economic data reinforced speculation in the market that the Federal Reserve will not raise interest rates at its September policy meeting.
Spot gold rose for a fourth straight day to a session high of $1,351.84 an ounce, a rise of 1.9 percent - its biggest gain since June 24.
Prices were up 1.73 percent at $1,349.29 per ounce by 2:20 p.m. EDT (1820 GMT). U.S. gold futures ended the session 2 percent higher at $1354.0.
Global benchmark Brent crude fell almost 1 percent on Tuesday as hopes waned for an agreement between two of the biggest oil producers to freeze output to tackle a global supply glut.
On Tuesday, Brent futures for November delivery fell 37 cents, or 0.8 percent, to settle at $47.26 a barrel. U.S. crude, meanwhile, rose 39 cents or 0.9 percent from Friday's settlement, to $44.83 per barrel. U.S. crude did not settle on Monday due to the Labor Day holiday.
