Market Movers of the Day Asia-Pacific Australian Retail Sales trend at 0.9% MoM Australian building permits disappoint with a rise of -0.1% Japanese Labor cash earnings falling -3.1% less than -3.9% expected Japanese Housing starts fall in august Europe German Unemployment at 8% surprising for the better EU CPI at -0.3% versus -0.2% expected Swiss KOF leading indicator at 0.85 against expectation of 0.33 Americas US Q2 GDP forecast at -0.7% significantly better than the -1.2% expected US ADP unemployment change at -254k US Real personal consumption expenditure falling -0.9% Chicago PMI at 46.1 substantially worse than expectations Canadian GDP for Jul MoM AT 0% against an expected rise of 0.4% US EIA Crude oil stocks at 2.8M
The Overall Sentiment
Overall sentiment was slightly negative as investors move to the side lines amid strong equity gains for the third quarter. In Asia pacific equities traded flat with Australian retail sales trend slightly better than expected and Japanese housing data still at subdued levels. In Europe stocks moved south as investors’ expectations for lower growth in the US continued to loom. German unemployment surprised slightly for the better but still pointed weak job market in the largest European economy. In addition CPI figures for the Euro Zone stud at -0.3% YoY pointing subdued inflation levels in the EU as demand remains at low levels. In New York sentiment was rather flat with the Dow weaker by –0.31% and the S&P by -0.33% in a session loaded with US economic data. The revised GDP estimate for the US surprised for the better with a -0.7% annualized growth against market expectations of a -1.2%. The improvement in GDP assessment which came surprisingly from higher than expected consumer and business spending which are considered to be the weak links in the current economic crisis moved Sentiment swiftly to the green side with stocks edging higher. However this spurred optimism was proved to be short lived as ADP unemployment, real core consumption expenditures and most importantly the Chicago purchasing managers index surprised for the worst with the Chicago PMI index lower than the most pessimistic forecasts reading 46.1.The weak employment data and business sentiment painted a sluggish recovery story causing stocks to retreat back to opening levels and end the day flat after edging higher. FX sentiment was largely in correlation with equities the Euro ended the day flat against the greenback settling at the 1.46$ zone and the Sterling hitting the 1.6$ before moving back to the 1.59$ zone. In the Petroleum arena crude oil stocks were higher than expected, Brent crude closed at the 68$ level still short of the 70$ mark and WTI crude at 70$. Precious metals ended the day with strong gains as looming instability of the FX markets make precious metals look as an attractive hedge. Gold advanced above the 1000$ mark once again settling around 1006$ an ounce, and silver pushed to the higher end of the 16$.
The Day Ahead
A day loaded with heavy weight economic data across the board will open with the Tankan readings before the opening of the Tokyo session. Most tankan readings published were in line with expectation and therefore not expected to swing sentiment in the region too much as investors’ eyes are focused on the Japanese Jobless rate at the day’s end. In the London session EU unemployment due at 9:00 is expected to set the tone with investors forecasting European unemployment to continue slowly but confidently advance to the double digit zone.UK manufacturing PMI will most likely effect sentiment for the Pound and UK equities as market expects an improvement in manufacturing with the weaker sterling is expected to assist the country’s industry. Moving to the US the New York session will open with the Personal income, personal spending data which will reflect on the resilience of the US consumer. Later in the day US ISM manufacturing is due with investors expecting manufacturing to continue rebound and the initial Jobless claim which always gathers market attention as investors expect unemployment to help time the fed rate hike. The concluding data for the day will be the Japanese unemployment figure with market forecast at 5.8%.Any negative surprise is expected to strongly effect sentiment for the Yen as this might postpone a change in the BoJ loose monetary policy.
Technical Analysis EUR/USD
The pair is currently aiming towards retest of the 1.44 support of the bullish trend. After topping out around 1.484 and trying to rebound around the 1.72 the pair is showing signs of weakness. The pair still has not broken the 1.45 level but a break of that level would confirm a test of the 1.44 support. A break of the 1.44 support might ignite even move bearish pressure and has the potential to move the pair to lows not seen in a while. A failure to break the 1.44-1.45 support zone could suggest a retest of the 1.48 zone as a resistance.
Market Analysis provided by eToro
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