Markets overreact to cancelled farm visit
Markets were a little bit shaky into the close on Friday following news reports that the Chinese delegation in Washington had cancelled a proposed visit to US farm states. Market pessimists assumed that this meant the trade talks had not gone well, and so pushed US indices lower into the close. The Dow Jones 30 Futures index finished 0.72% lower to post the first down-week in four weeks, the Nasdaq 100 dropped 1.03% and the S&P 500 fell 0.68%.
US30 Weekly Chart
However, it turned out over the weekend that the cancellation had nothing to do with trade talks and so equity markets have rebounded in early trading at the start of this week. The US30 index is up 0.37%, the SPX500 has gained 0.40% and the NAS100 has risen 0.46%. A Tokyo holiday has perhaps reduced liquidity so the moves may have been a tad exaggerated.
Risk currencies rebound
On the currency front, it looks very much like a risk-on play, with the yen sliding 0.15% versus the US dollar to 107.71 and the Australian dollar rising 0.20% to 0.6779 against the dollar and 0.33% against the yen to 73.02. The US dollar index, the measure of the dollar’s value against six major currencies is trading 0.05% lower at 98.46.
AUD/USD looks poised for its first positive day in four days after posting the biggest weekly loss in eight weeks last week. It looks as if the 61.8% Fibonacci retracement of the September 3-12 rally at 0.6767 is holding for now.
AUD/USD Daily Chart
September PMIs on tap
It’s a day of flash manufacturing PMIs from Market today, with recent surveys suggesting a slightly better of flat reading compared with last month. Germany’s PMI is seen improving to 44.0 from 43.5, though it would still be the seventh consecutive monthly reading below the 50 contraction/expansion threshold. For the Euro-zone, a climb to 47.3 from 47.0 is expected, but again it will have been below the 50 level for a seventh month. The reading for the US looks slightly better and is seen steady at 50.3.
Other data points/events include the Chicago Fed activity index for August (marginal improvement to -0.35 from -0.36 is seen, and a speech from the Fed’s Williams, a voter this year with a dovish bias.