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France’s Le Maire: There is a glimmer of hope for a Brexit deal

  
  Analysis
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Comments by French finance minister, Bruno Le Maire

  • Reiterates that it is more preferable to have a Brexit deal than no-deal
  • Will have to see what concessions have been made in Brexit negotiations
  • Red line remains the importance of protecting European single market
Nothing that really stands out here from Le Maire but for now, we could be still headed towards some form of draft deal ahead of the summit tomorrow.
That said, it remains to be seen whether or not the deal will fly with the UK parliament. I reckon that’s more of the spot to watch rather than how things will play out with the EU.

The bond market isn’t feeling too upbeat on trade talks

  
  Analysis
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Treasury yields fall across the curve to session lows

USGG10YR

10-year yields are down by 2.5 bps to 1.644% as yields slip across the curve to start the European morning. While equities are holding higher, the bond market is sending a different signal with regards to positioning ahead of the trade talks outcome.
Essentially, this is what is holding yen pairs back from moving higher on the day with USD/JPY still seen near flat levels at 108.00.
Markets are mixed and a bit paralysed at the moment as everyone is just waiting to see what happens to talks in Washington later today. I reckon that will remain the case ahead of North American trading before we get more trade headlines to work with.

US auctions off 30 year bond at 2.170% vs WI level of 2.169%

  
  Analysis
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US auctions off $16 billion of 30 year bonds

  • High yield 2.17% versus WI of 2.169%
  • Bid to cover 2.25x vs six-month average of 2.23x
  • Dealers took 22.94%. vs six-month average of 27.3%
  • Directs 18.5% vs six-month average of 18.8%
  • Indirects 58.5% vs six-month average of 67.2%
the US treasury completed its refunding by selling 16 billion of 30 year bonds at a high yield of 2.17%. That was slightly above the 2.169% level at the auction time. The bid to cover was near the six-month average. Dealers took a lower percentage than the average at 22.94% suggesting a distribution of the auction to nondealer participants.
Give the auction the C+ to B-

Japan – Reuters Tankan poll shows manufacturer outlook less pessimistic, service-sector sentiment three-month high

  
  Analysis
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The Reuters Tankan seeks to track the BOJ report. Reuters is monthly, BOJ Tankan is quarterly.

Japanese manufacturers’ business outlook was less pessimistic in October
service-sector sentiment rose to a three-month high
 manufacturers voiced worry about the protracted trade war and slowdown in China’s economy
some Japanese firms do not see the impact of the global slowdown immediately hurting the economy
Sentiment index for manufacturers minus 5,
  • up two points from the prior month’s 6-1/2-year low of minus 7
  • index is expected to minus 6 in January
service-sector index climbed to plus 25
  • from plus 19 in the previous month
  • led by retailers who have likely benefited from consumers rushing to beat the Oct. 1 sales tax which went up to 10% from 8%
Poll of 504 large- and mid-sized companies, in which 248 firms responded
  • conducted Sept. 26 to Oct. 7

Order flow levels across major pairs.

  
Analysis, Forex
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Orders in the market seen across major pairs

  • Sell orders on NZDUSD on 0.6480/90 and 0.6360/70
  • Sell orders on AUDUSD at 0.6800/10 and 0.6910/20
  • Sell orders on EURJPY at 120.40/50, 118.70/80

and buy orders at 116.20/10

  • Sell orders on USDJPY at 108.70/80, 108.30/40

and buy orders at  106.00/90 and 105.00/90

Sell orders on GBPUSD at 1.2680/90 and 1.2530/40

and buy orders at 1.2000/90

  • Sell orders  on EURUSD at 1.1010/20

What lies ahead for the USD?

  
Analysis, Forex
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What is the outlook for the US dollar

What is the outlook for the US dollarThe USD has been steady versus a basket of major currencies since the start of 2019. The dollar index is trading close to September highs, which, in turn, are at the maximum levels since 2017.

The current week, however, hasn’t been very positive for the American currency. So, what future awaits it? In this article, you will find the fundamental outlook for the greenback.

US economy has faltered

Life shows that it’s not possible to fight in trade wars and stay unharmed. The data released on Tuesday showed that the US manufacturing sector is in its worst condition in a decade: ISM Manufacturing PMI dropped from 49.1 to 47.8 in September.

A reading below 50 indicates industry contraction. Given how low the latest number is, it’s certain that even if the underlying picture changes and positive factors come into play, the situation won’t be able to improve fast.

And so far, there are few reasons to believe that the United States and China will achieve a big breakthrough in their negotiations. Representatives of the nations will meet next week on October 10 and 11.

Although soothing comments may cheer the stock market, it will take the mutual renunciation of tariffs to amend the damage done to the economy. If talks fail, there will be more tariff hikes in the following months and hence an even stronger economic pain.

Moreover, recent rumors indicate that Donald Trump is considering limiting American investment flows to China. This step, if taken, would further escalate the trade conflict.

Remember that everything is interdependent in the economic world. Considering the external troubles, it’s now up to US consumers to drive economic growth. For them to be able to do that, they need ample wages.

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US Indices reverse from the sharp declines and close at session highs

  
Analysis, US Market
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NASDAQ index up 1.12%. S&P index also up nicely

The US stocks fell sharply after the worse than expected ISM nonmanufacturing index. The NASDAQ and S&P index fell -1.1% added slows. The Dow industrial average was down -1.29%. However, buyers into the market by the close, the major indices were trading at session highs.
The final numbers are showing:
  • The S&P index rose 23.02 points or 0.80% at 2910.63
  • The NASDAQ index rose 87.02 points or 1.12% at 7872.26
  • The Dow industrial average rose 122.42 points or 0.47% at 26201
The percentage change ranges for the major indices in the North America and Europe are outline below. In Europe, the German DAX got creamed falling -2.76%. The UK FTSE was also lower but a more modest -0.63%.
NASDAQ index up 1.12%. S&P index also up nicely_

Some winners today:

  • Slack, +6.27%
  • Nvidia, +4.83%
  • Micron, +3.57%
  • Square, +3.25%
  • Pepsi, +2.95%
  • Facebook, plus a 2.75%
  • Pfizer +2.22%
Some losers on the day included
  • Tesla -4.16%
  • Charles Schwab, -3.83%
  • Delta Air Lines, -2.8%
  • Alcoa, -1.35%
  • Disney, -0.76%
  • UnitedHealth, -0.66%
  • Johnson & Johnson, -0.5%

US major indices ending near session lows

  
Analysis, US Market
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Not a good day for the major stock indices

The major US stock indices were spooked by weaker than expected ISM manufacturing data . Shortly after the data came out, the major indices turned from being up to being down.

The momentum continued through the day.
The final numbers are showing:
  • S&P index, -36.56 points or -1.23% in 2940.18. That is just off the session low at 2938.70. The pair fell below its 50 day moving average today which had been holding support for most of September. That MA comes in at 2948 area.  Stay below going forward keeps the bears in control.  The 100 day MA is down at 2925.50 currently.  A move below that level increases the bearish bias for the pair
  • NASDAQ index, -90.654 points or -1.3% at 7908.68. The low for the day reach 7906.293. For the Nasdaq index, it tumbled below its 100 day moving average at 7963.81 today.  The next major target would be its 200 day moving average. However that is still a bit away at 7704.411.
  • Dow fell -343.79 points of -1.28% at 26573.04.. The low for the index reached 26562.22.
Selling with broad-based today with all the major sectors moving lower.
Some of the major losers today included:
  • Charles Schwab, -9.73%. They lowered commissions $0 on trades
  • DuPont, -4.73%
  • Schlumberger, -4.36%
  • 3M, -3.67%
  • General Motors, -3.66%
  • Slack, -3.46%
  • Cisco, -3.36%
  • Caterpillar, -3.14%
  • Morgan Stanley, -3.05%
  • Ford motors, -2.84%
  • Wells Fargo, -2.76%
  • Fed ex, -2.72%
  • McDonald’s, -2.64%
  • Bank of America, -2.50%
  • Exxon Mobil, -2.37%
  • Twitter, -2.33%
  • Goldman Sachs, -2.20%
Some winners on the day included
  • Phillip Morris, +2.52%
  • Tesla, +1.59%
  • Visa, +1.34%
  • Box, Inc, +1.15%
  • Wynn resorts, +1.11%
  • Netflix, +0.73%
  • Papa John’s +0.42%
  • Coca-Cola, +0.37%
  • Apple, +0.25%
  • Pepsi, +0.20%

A look at the US-China trade war and its impact on markets

  
  Analysis
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The impact escalation will have

The impact escalation will haveThe focus of the market on the China-US trade war is acute due to China’s and the United States economic weight. In 2018 the US’s GDP was above $20 trillion and China’s GDP over $14 trillion, which makes them the world’s two largest economies by nominal GDP.

Furthermore, consider that when you add these two countries GDP together, they account for more than 40% of the world’s entire GDP. So, the first point to grasp is that the significance of a US-China trade war is really a global growth problem.

When you factor in the alliances and trade partners of both countries, the legitimate concern is that a China-US trade war spills over across the entire globe and slows down the entire world economy.

Trade between the US and China

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UK car output rises for the first time in 15 months in August

  
  Analysis
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A piece of good news for this sector of the UK economy!

Reuters (Link) with the report, in brief:
  • car production increased by an annual 3.3% in August
  • first rise in 15 months
And, now for the extra bits, maybe not quite so good:
  • helped by several factories having moved their summertime shutdowns to April in preparation for the original Brexit date
  • BMW, Peugeot, Honda and Jaguar Land Rover all closed factories ranging from a few days to four weeks in April over concerns that Britain’s scheduled departure from the European Union in March could lead to disruption, including delays to the arrival of parts
“Today’s figures mask the underlying downward trend and strengthening global headwinds facing the sector, including international trade tensions, massive technological upheaval and, in the UK, political and economic uncertainty,” said SMMT Chief Executive Mike Hawes.
 
“We now need parliament and government to redouble efforts to get a deal that maintains free and frictionless trade.”
Yeah, about that ….
A piece of good news for this sector of the UK economy!
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