China’s PMI Disappoints

Asian markets continued to lose ground after China’s factory data or PMI came in lower than expected. This puts some doubt on the country’s recovery. It is recovering but how strong is this recovery? Investors are also worried about a U.S. government shutdown on Oct. 1.

China’s official PMI reading came in at 50.2 for September. This was way below the expected 51.2 and a tad higher than 50.1 released in August. Factory orders are not growing the pace investors would like. We could see some stimulus from the Chinese Government over the next 6 months.

Concerns that the U.S. Government will shut down grew over the weekend. The House of Representatives voted to delay President Obama’s health care initiative call Obamacare for one year as a precondition to extend the debt ceiling. The Senate Democrats will overturn this leading to more infighting and wrangling.

STOCKS
The Japanese index, Nikkei 225, was down over two percent at one point as the yen climbed in value, hitting 97.50 at one point. Investors were very jittery over mixed economic data today. The S&P/ASX in Australia was down over one percent on the day as well thanks to China’s PMI. Energy companies lost the most on the index. The Shanghai Composite bucked todays downtrend and was up 0.2 percent. Trading was thin ahead of the week long holiday starting Oct.1.

U.S. markets were lower on shutdown fears. The DJIA lost 70 points to 15,258.24. The Dow lost 1.25 percent for the week. The S&P 500 lost nearly seven points to finish at 1,691.75. The index was down one percent for the week. The NASDAQ lost 5.83 points to close at 3,789.59. The tech heavy NASDAQ squeaked out a 0.18 percent gain for the week.

CURRENCIES
The AUD/USD (0.9292) corrected last week and is testing a crucial level of support. If that holds the market can bounce and recover. The Dollar is overall weak so we should see a recovery. See below chart.

The Dollar is weaker against the Euro, Sterling, Yen… it is just plain weak.

The EUR/USD (1.3503) is still trading in a narrow pattern from 1.3490 to 1.3564. There is a wider range, on long range charts from 1.3400 to 1.3600 with a bullish tone as it tracks strengthening European equities. The GBP/USD (1.6142) has pushed pass 1.6000 and is now above 1.6100. A break above 1.6200 targets 1.6350. The USD/JPY (97.943) is below 98.00 but could find support 97.60. If that holds we could retarget 99.00 and even 100.00.

COMMODITES
Gold (1339.70) has risen on U.S. debt ceiling worries. However, we remain range bound from 1300 to 1370 at this time. Silver (21.70) continues to be stuck in a bearish consolidative pattern. Copper (3.3155) is trading higher and targeting 3.32 which we expect to hold and bring back a fall towards 3.20.

TODAY’S OUTLOOK
The U.S. Senate will block the House of Representatives delay of Obamacare. This will bring the U.S. one step closer to a shutdown October 1. Data wise, we get the Chicago PMI and he Dallas Fed Manufacturing number.