Stocks were mixed overnight as the market continues to wait for non-farm payrolls on Friday. Key points were the big drop in oil, the Turkish retaliatory strike on Syria and the protests in Iran over the sharp drop in the value of the Iranian rial which has plunged something like 30% over the past week or so.
Data from the US was a little brighter with ADP private payrolls adding 162,000 last month which was more than the pundits had expected. Equally positive was the release of the ISM’s Services sector report which showed a rise to 55.1 from 53.7 last month. Pundits had been expecting a fall to 53.4. Markit Economics reported that:
The business activity index, which feeds into the global PMI, surged from 55.6 to 59.9, though no explanation could be given for the strong upturn. The …upturn in the headline index being offset by the employment index falling from 53.8 to 51.5 and a sharp upturn in price pressures, which rose at the fastest rate for seven months.
Markit also reported that the global PMI which it produces for JP Morgan accelerated to 52.5 in September from 50.9 in August. The key thing to note is the divergence between services and manufacturing on a global basis. Services continue to rise while manufacturing is in its 4th month of decline. This is interesting though in light of the services sector weakness reported for Europe and China in the past 24 hours.
At the close of play stock markets in the US were higher with the S&P 500 up 0.36% to 1450, the Dow rose 0.09% and the NASDAQ was up 0.49%. In specific stock news Hewlett Packard was under pressure with its share price at 9 year lows after the company warned on the outlook for earnings in 2013 – the worst part of the report was that the CEO blamed the decline on the large turn over of key execs – yuk.
In Europe the FTSE rose 0.28%, the DAX was up 0.22% while the CAC fell 0.24%. Spain was off 0.55%. Reports are that Europe remains concerned about what is going on in Spain.
On currency markets the Australian dollar was the stand out loser falling to a low of 1.0194 in the wake of the poor trade data that was released yesterday. It has bounced a little this morning to 1.0115. It was interesting to see David Murray on the ABC’s 7.30 report overnight – talking about the way things are and the way they might be in the future. He has a fairly jaundiced view of the potential outcome for Australia and notes that part of the problem is the very fact that we are living off other peoples savings offshore and also the fact that the Australian dollar is not doing its normal job of insulating the economy at a time such as this. But he effectively says it will eventually – worth the 9 minutes.
Elsewhere in FX markets the better than expected US data pulled the euro’s rally up and it dropped to a low of 1.2876 before rising to 1.2904 as I write. The Pound was lower as well and USD/JPY a little higher as the USD strengthened.
Big news on commodity markets with Nymex crude dropping to a low of $87.69 Bbl from the day’s high of $91.81. Having broken and then retested support/resistance at $93.73 over the past couple of weeks the next big level for Nymex is $86.90 so we’ll see how it goes. The sell off is interesting in the context of what is happening in Iran and the punch up between Turkey and Syria but it seems most traders were focussed on the Chinese slowdown – at least that’s the ex-poste rationale. Technicians might tell you it’s the break and then hold of the $93.73 level I mentioned above. Gold is up around the highs still at 1777.83 oz but momentum is fading at present and a pullback is possible if gold can’t climb above $1788/90 soon.
Lets have a look at some Meta4 charts from my AVATrade platform.
EUR/USD: Euro bounced off the 200 dma on Monday and 1.2800/12 remains the key short term support for the EUR and the ADX suggests the rally has washed the down trend away for the moment as euro traders figure out the next move. Below 1.28 support is 1.2733 which is the 38.2% retracement of the recent up move. Topside EUR needs to push through 1.2965/75 to kick on.
AUD/USD: The break of the 200dma and the fact that my JimmyR is negative suggests the AUD is on its way to 1.0150/60 for a full round turn. On the 4 hour charts however the bounce we are seeing might have some legs – resistance 1.0264:
Data: PMI’s in Europe and the US ADP employment report as a precursor to non-farm payrolls on Friday.
Here is a snapshot of where markets sat at 6.10am this morning from MT4 at AVATrade
Twitter: Greg McKenna . He is the Chief Investment Officer of Macro Investor, Australia’s independent investment newsletter covering trades, stocks, property and yield. Click for a free 21 day trial.
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