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Morning Roll Call

Aug 27 • Morning Roll Call • 1492 Views • No Comments

Orders For Durable Goods In The USA Collapses rusty-factory

We thought carefully before using the word “collapse” as it can often suggest a cataclysmic slump. Despite the economists polled suggesting that the USA durable goods orders would fall by -3%, versus a 3.9% growth the previous month, the print of -7.3% was undoubtedly a shock.

This data is usually revised via the Factory Orders report released a week later. Durable goods are defined as hard products having a life expectancy of more than 3 years, such as: automobiles, computers, appliances, and airplanes. It’s a leading indicator of production; rising purchase orders signal that manufacturers will increase activity as they work to fill the orders.

The economists were circa 100% out with their prediction having carefully pre-warned the markets that the figure would be extremely poor. Whilst it rated as only a medium impact news event the seriousness of this miss shouldn’t be underestimated, or played down. The USA govt and the Fed have gone to unprecedented lengths to stimulate growth since the 2007/2008 collapse and credit crunch. The overall monetary value of the total rescue is in many ways incalculable given the ‘secrecy’ of many of the earlier direct bail outs/interventions. But what is for sure is that the latest monetary easing will reach over $1 trillion by the end of this year, with or without tapering, yet it’s not been enough to stimulate, or sustain durable goods orders which are a major indication of the health of the USA economy.

 

Market overview

The major equities markets closed mainly down on Monday, the DJIA suffered a late fall apparently due to the increasing noises regarding military action and intervention in Syria. The DJIA closed down 0.43% at 14946, the SPX 500 down 0.40% and the NASDAQ down 0.01%. Looking at European indices the STOXX closed down 0.6%, DAX closed up 0.22%, CAC down 0.06%, MIB down 2.10% and the IBEX down 0.42%.

Looking towards Tuesday’s trading sessions the DJIA equity index future is up 0.06%, the NASDAQ up 0.09%. Many of the European equity index futures are currently down at the time of writing; CAC down 0.05, DAX up 0.14%, STOXX down 0.21% whilst the UK FTSE equity index future is currently flat.

 

Commodities

ICE WTI oil closed down 0.47% at $105.92 per barrel in Monday’s session whilst NYMEX natural closed down 0.23% at $3.50 per therm. COMEX gold spot closed at $1403 per ounce up 0.71%, whilst silver on COMEX closed up 1.08% at $24.28 per ounce.

 

Forex focus

The dollar fell by 0.2 percent to 98.51 yen after falling up to 0.6 percent earlier in Monday’s trading sessions. The U.S. currency increased by 0.1 percent to $1.3368 per euro after depreciating 0.4 percent last week. The euro fell by 0.3 percent to 131.69 yen. The dollar gained versus the majority of its sixteen most-traded currency peers as the shocking U.S. report on durable goods failed to dampen speculation that the Federal Reserve will start cutting bond purchases in September.

The loonie was little changed at C$1.0501 per U.S. dollar late in the New York session. It declined earlier by as much as 0.4 percent to C$1.0533, after touching C$1.0568 on Aug 23rd, the weakest level seen since July 9th. One Canadian dollar currently buys 95.23 U.S. cents.

 

Fundamental policy decisions and high impact news events that could affect sentiment on August 27th

The German IFO business climate data is published on Tuesday morning, the expectation is for a rise to 107.1.

The USA Conference Board confidence index is published in the afternoon session, the expectation is for a slight fall to 79.6. Financial confidence is a leading indicator of consumer spending, which accounts for a majority of overall economic activity. The survey of about 5,000 households asks respondents to rate the relative level of current and future economic conditions including labor availability, business conditions, and overall economic situation.

The Richmond manufacturing index is expected to print at -7 from -11 the previous month. Above 0 indicates improving conditions, below indicates worsening conditions. Tends to have a muted impact because there are earlier regional indicators related to manufacturing conditions. It’s a survey of about 100 manufacturers in the Richmond area which asks respondents to rate the relative level of business conditions including shipments, new orders, and employment.

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