U.S. equity market investors ignore the USA manufacturing PMI which indicates potential recession, to print new record highs.
There are several red lights currently flashing for the U.S. economy, but when investors are locked into the herd mentality of risk-on sentiment and behaviour, many of the key economic fundamentals which analysts respect tend to be ignored. On Wednesday the latest IHS Markit U.S. Manufacturing PMI came in at 50.0 for July 2019, the lowest reading printed since September 2009 and below market expectations of 51.0. The 50 line represents the dividing line between contraction and growth suggesting that despite the massive tax breaks and the Trump administration’s commitment to MAGA (make America great again), only Wall St. has enjoyed significant growth since his inauguration.
According to IHS Markit data output in July contracted the most since August 2009 and new work from overseas declined at the fastest pace since April 2016, while employment in manufacturing dropped for the first time in six years. The latest GDP growth figures for reading for Q2 will be published on Friday afternoon and if as forecast the print comes in at 1.8% falling from 3.1%, the FOMC might feel justified in cutting the key interest rate from 2.5% at the end of their two day meeting on July 31st.
The key USA equity index the SPX and the NASDAQ 100 printed fresh record highs during the New York session. The SPX closed up 0.47% at 3,107 and the NASDAQ 100 closed at a record high of 8,009 breaching the psyche handle of 8,000 for the first time in its history. At 22:15pm U.K. time on Wednesday the DXY, dollar index, traded close to flat at 97.68. USD/JPY traded down -0.07% and USD/CHF down -0.03% as USD sold off across the board with the exception of rises versus the Aussie and Canadian dollars. AUD/USD traded down -0.39% with USD/CAD up 0.06%.
Sterling rose versus several of its peers during Wednesday’s sessions as the currency experienced a form of relief-rally after the Tory party announced the result of their leadership contest on Tuesday. Boris Johnson was installed officially as the U.K. prime minister on Wednesday and despite his insistence that the U.K. will leave the E.U. on October 31st, the FX markets bid up the U.K. pound. The appointment of Savid Javid as chancellor of the exchequer was quickly viewed as a sound decision, however, Johnson created chaos in ministerial circles by sacking the majority of ministers whilst others left or retired before being pushed out. At 22:30pm U.K. time GBP/USD traded up 0.40% as EUR/GBP traded down -0.43%.
The euro experienced falls against most of its peers on Wednesday as investors and traders began to focus on the ECB rate setting announcement and Mario Draghi’s press conference coming up on Thursday afternoon. Traders who trade events or the euro exclusively would be advised to ensure that between 12:45pm and 13:30pm U.K. time they’re in a position to monitor any EUR positions they have in the FX market.
As tensions have eased in the Strait of Hormuz the price of oil on global markets has receded. That reduction continued during Wednesday’s sessions after crude oil inventories data for the USA was published. At 22:50pm WTI oil was priced at $55.91 per barrel down -1.53% on the day. Gold continued to trade close to six year highs rising by 0.62% on the day trading at $1,426 per ounce.
« Are all forms of technical analysis fallacies or do some stand up up scrutiny? The Aussie dollar falls as RBA Governor commits to low interest rates for an extended period, focus now turns to the ECB this afternoon »