Good morning
Today marks the rather concerning 35th anniversary of me starting working in the city. You’d think by now I’d know it all but as I have discovered over the years, there is always a surprise or something new to learn lurking just around the corner. I guess the same is true for all industries, but ours just seems to have more than its fair share of 19 year old ‘experts’ who claim to know everything and have, in reality, seen very little. Regardless, after all these years I’m still enjoying ensuring clients minimise their risks and maximise their profits. What is there to not enjoy about that!
Well, having said that all that, I’m still struggling to come to terms with being back from a two week jaunt around Europe. It was hard work, a lot of walking in high temperatures, a lot of food and a very decent amount to drink. I think I was running on empty by the end of it and am paying the price now.
But enough about me. Over to the markets. The first trading day for US equities in September didn’t go well, with Nasdaq falling over 3%, S&P over 2% and Dow Jones down 1.5%. Nvidia’s near 10% decline after it got a BoJ subpoena didn’t help matters. It was a bad day for equities elsewhere as well, UK and EU dropped but we’re likely to see further declines this morning after Asian markets also suffered, with Nikkei down over 4%. In currencies, we had a very slightly stronger USD again yesterday despite a mixed ISM release, I think the higher than expected employment index element helped support the US dollar. Nothing too spectacular, GBPUSD traded down to 1.3090 from 1.3145 and EURUSD slipped from 1.1070 to 1.1035, both pairs are off the lows as I type at 1.3115 and 1.1060 as I type. Meanwhile GBP had gained against EUR through the day to reach almost 1.1900 but was unable to hold those gains, falling back to 1.1860.
Aussie GDP overnight came in as expected, many are highlighting this morning that these are the weakest set of growth data since 1991 if we exclude the Covid years. AUD traded lower, GBPAUD pushed up to 1.9600 on the release but is back at 1.9540 as I type, GBPNZD is 2.1200. Aussie trade balance due out tonight, expected to show another surplus.
BoC meet today and it is widely expected that they will cut rates by 25bps for the third meeting in a row, which would take rates to 4.25%. While there are still some who look for no change, recent Canadian data has not been great recently and does seem to support a rate cut. This Friday we’ll get the latest employment data from Canada which is expected to show unemployment rate at 6.5%, the highest level for seven years, discounting the Covid years. That’s the second time this morning that I’ve mentioned historical data excluding Covid, I imagine we’ll see a lot more of this in the coming weeks, months and years.
US employment numbers this afternoon in the form of JOLTS, one of the Fed’s favourite measures, although as we know the main event will be nonfarms on Friday. Plenty of scope for a bit of market movement while the markets continues to debate a 25 or 50bps cut from the Fed this month. I’m erring on 25bps, anything larger could well give the markets some reason to panic that a recession is looming. Fed were slow to raise rates and I think they have time to slowly cut, barring a shock to the downside for employment.
Right, most kids are back to school this week which puts the summer holidays firmly behind us. Some heavy rain looks forecast and temperatures will be just below the 20°c area. All back to normal then!
Have a great day
- 08.00 ECBs Elderson speaks
- 09.00 EU composite PMI
- 10.00 EU PPI
- 14.45 BoC rate announcement
- 15.00 US JOLTS job openings
- 19.00 Fed Beige book
- 02.30 AUS trade balance
- 03.00 RBAs Bullock speaks
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