U.S and European equities sell off sharply, WTI oil rises for third day, gold continues its recent gains, U.S. Dollar falls versus its main peers

Sep 6 • Morning Roll Call • 1467 Views • Comments Off on U.S and European equities sell off sharply, WTI oil rises for third day, gold continues its recent gains, U.S. Dollar falls versus its main peers

As widely forecast, Australia’s central bank (the RBA), kept its main interest rate at 1.5%, however, AUD/USD broke to the upside, breaching R2, as the decision was made public. The Aussie made moderate gains versus several peers during Tuesday’s trading sessions, not necessarily due to the announcement, or the statement accompanying the decision, moreover as a consequence of other currencies’ weakness, which in turn flattered the Aussie dollar’s gains.

As Houston and it’s surrounding towns and cities, combined with the states of Texas and Louisiana, begin to formulate a plan to clean up after tropical storm Harvey, another hurricane, already declared a category 5 and with winds approaching speeds of 185mph, which will be the strongest ever recorded in the area, is preparing to hit the Caribbean and potentially continue to then move to the USA. The current trajectory suggests the storm will eventually make landfall in Florida USA on Friday, unless it somehow loses its devastating force, near the badly defended Caribbean islands it crashes into first.

This event, allied to the continued geo political tensions with North Korea, and shocking factory and durable goods orders published on Tuesday, appeared to effect the general mood of U.S. equity investors as all the major indices closed down sharply; DJIA down 1.07%, SPX down 0.76%, and the NASDAQ down 0.93%, whilst the dollar index fell to its lowest level in almost two years. The U.S. dollar also sold off versus its main peers; GBP/USD crashing upwards through R3, closing the day up circa 1% at 1.303, its largest daily gain in over seven weeks, USD/JPY fell to 108.70, crashing through S3 down circa 0.9% at 108.70. EUR/USD also made gains versus the U.S. dollar, albeit restricted to an approximate 0.2% advance, just below R1 at 1.1912. The euro’s gain versus the dollar was moderated as a consequence of the single bloc’s currency falling versus the majority of its peers; falling sharply versus: sterling, Aussie and New Zealand dollar and yen, with yen enjoying further solid gains, due to its continued safe haven appeal. Gold and other precious metals likewise maintained their appeal as a store of value in uncertain times, gold ending the day up approx. 0.6% to $1339, having at one stage breached R2, as it reached $1344 per ounce. WTI oil closed up on the day by circa 3%, at $48.82 per barrel.

In terms of USA economic calendar news and data, factory orders came in down -3.3% in July, with durable orders falling by a shocking -6.8%, the second month in series such a figure has been recorded. This extremely poor data, comes shortly after many in the analyst community, were (perhaps prematurely), congratulating the USA on the recovery of its manufacturing and production industries.

Looking towards Europe, Swiss GDP failed to reach forecast; registering a 0.3% Q2 and 0.3% YoY growth figure. In the various Markit PMIs released for Italy, France and Germany, only Germany’s services and composite readings beat forecasts, the services and composite readings for the Eurozone also missed the forecast. From the U.K. perhaps more evidence is emerging of consumers being close to their limit, in terms of credit and appetite for large ticket purchases; new car sales continued their astonishing collapse, down 6.4% YoY in August. The UK’s service PMI for August missed target by coming in at 53.2. Euro STOXX 50 closed down 0.28%, CAC down 0.34%, FTSE 100 down 0.52%, with the DAX closing up 0.18%.

Significant economic calendar events for September 6th, all times quoted are London (GMT) time

06:00, currency impacted EUR. German Factory Orders n.s.a. (YoY) (JUL). The forecast is for a rise to 5.8%, from the 5.1% figure registered in June.

07:30, currency impacted EUR Markit Germany Construction PMI (AUG). The expectation is for the figure of 55.8 recorded in July to be maintained.

08:10, currency impacted EUR. Markit Germany Retail PMI (AUG). The prediction is that July’s reading of 50.7 will be closely matched.

12:30, currency impacted USD. Trade Balance (JUL). The trade deficit figure is forecast to rise to -$44.6b, from the -$43.6b published for June.

14:00, currency impacted CAD. Bank of Canada Rate Decision (SEP 06). The general consensus, amongst the economists polled, is for the rate to remain unchanged, at 0.75%.

14:00, currency impacted USD. ISM Services/Non-Manufacturing Composite (AUG). The expectation is for a rise to 55.5, from the 53.9 revealed for July.

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