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Morning Roll Call; USA manufacturing expands faster than forecast whilst market optimism is dampened due to Syrian crisis escalation fears

Sep 4 • Morning Roll Call • 1538 Views • No Comments

USA manufacturing expanded at a faster rate than the economists polled had predicted, activity in the manufacturing sector expanded in August for the third consecutive month, and the overall economy grew for the 51st battleships-gameconsecutive month, according to the nation’s supply executives in the latest Manufacturing ISM Report On Business. The PMI registered 55.7 percent, an increase of 0.3 percentage point from July’s reading of 55.4 percent. August’s PMI reading was the highest of the year.

However, with the USA president and assorted politicians lobbying for Congress to issue a green light to intervene in the Syrian crisis, by using force as opposed to diplomacy, any positive impact on the main indices in Tuesday’s trading sessions was muted…

The DJIA closed up 0.16% at 14833, whilst the SPX 500 closed up 0.42% and the NASDAQ closed up 0.63%. European indices fell with few exceptions. The STOXX closed down 0.75%, the UK FTSE closed down 0.58%, the CAC closed down 0.80% and the DAX closed down 0.77%. The Syrian crisis sensitive Istanbul exchange index closed down 2.29%, whilst the Athens exchange bucked the market trend by closing up 2.37%

 

Equity index futures

Looking towards equity index futures, at the time of writing the DJIA is currently down 0.13%, the SPX down 0.14% whilst the NASDAQ is flat. European equity indices futures are down sharply; the FTSE by 0.62%, STOXX 0.51%, CAC down 0.72% and the DAX down 0.66%. The Istanbul exchange equity index future is down 1.84%.

Predictably oil spiked due to the hawkish statements from various USA politicians regarding the Syrian crisis. ICE WTI oil closed up 1.63% on the day at $198.54 per barrel pushing towards the yearly high which will possibly be breached if the USA decides to strike Syria. NYMEX natural closed up 0.35% on the day at $3.68 per therm.

COMEX gold closed down 0.04% on the day at $1411 per ounce whilst silver on COMEX was priced at $24.35 down 0.32%.

 

Forex focus

Sterling climbed to its strongest level in fifteen weeks versus the euro as Markit Economics and the Chartered Institute of Purchasing and Supply said a gauge of U.K. construction increased. Sterling gained 0.3 percent to 84.62 pence per euro, after touching the highest level seen since May 21st. It gained 0.1 percent to $1.5568.

The greenback rose 0.1 percent to 99.46 yen. Japan’s currency added 0.1 percent to 130.93 per euro. The U.S. currency appreciated 0.2 percent to $1.3165 per euro after climbing to the highest level since July 22nd.

The greenback rose to a seven-week high after the ISM report showed U.S. manufacturing expanded in August to the fastest pace since June 2011, adding to speculation that the Federal Reserve will start cutting its bond purchases later this month. The U.S. Dollar Index, tracking the greenback versus ten other major currencies, gained 0.1 percent to 1,037.07 in the New York session after reaching its highest level since July 16th.

The loonie gained 0.1 percent to C$1.0535 per U.S. dollar at the mid point of the New York session after dropping 0.4 percent last week, its third successive weekly decline. One loonie buys 94.92 U.S. cents. Canada’s dollar rose versus its major peers due to speculation that demand for oil will be increased by heightened tensions in the Middle East.

Australia’s dollar rose after the nation’s Reserve Bank held its benchmark rate unchanged at 2.5 percent and refrained from signaling further monetary easing. The Aussie gained 0.8 percent to 90.50 U.S. cents after rising 1.1 percent to the strongest level seen in almost two weeks. It climbed 0.9 percent to 90.01 yen and touched 90.51, the highest level witnessed since July 29th.

Commodity-exporting nations have dropped this year in a basket of 10 developed-nation currencies tracked by the Bloomberg Correlation-Weighted Index. The loonie has fallen 1.1 percent, New Zealand’s dollar has dropped 1.2 percent and the Australian currency has slumped by a significant 9.3 percent.

 

Fundamental policy decisions and high impact news events that could affect sentiment on September 4th

Services PMIs for Europe and the UK constitute the majority of high impact news events in the London morning trading session. The UK services PMI, published courtesy of Markit, is predicted to come in at 59.3, below the previous month’s 60.2.

Trade balances for Canada and the USA also rank as high impact news events with the USA balance predicted to print at -38.7bn. Canada’s trade balance is predicted to print at -0.3bn. Canada’s base rate decision is also made by its central bank and is predicted to remain at 1.00%.

It’s that time of the month when the USA fed issues its ‘beige book’ statement, This analysis is used by the FOMC to help make their next decision on interest rates. However, it tends to produce a mild impact as the FOMC also receives 2 non-public books – the Green Book and the Blue Book – which are widely believed to be more influential to their rate decision. It’s derived through evidence supplied by the 12 Federal Reserve banks regarding local economic conditions in their district.

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