The US Dollar declined against other major currencies on Wednesday morning, after the US Dollar Index (USDX) hit a new three-weeks-high earlier on Tuesday. Despite the ongoing dollar strength, some emerging market currencies are continuing to recover such as the Russian Ruble (RUB), which traded at its highest level since the beginning of August. Higher prices for energy commodities, such as crude oil and natural gas are helping the Russian currency, as these sectors contribute a double-digits percentage to the Russian Gross Domestic Product (GDP).
While many stock indices traded lower on Tuesday, most equity future indices were seen trading up on Wednesday morning. Brazilian shares surged higher on Tuesday with the Ibovespa (Brazil) closing almost 4 percent higher, after reports indicated that the far-right candidate for the presidential office, who is seen as more market friendly than his opponent, gained in polls ahead of the election at the end of the month.
Cryptocurrencies further extended losses, with Ripple having one of the weakest performance of major digital currencies, while losses in the Bitcoin were relatively limited as it continues to trade in range.
On Wednesday Italy will report its GDP for the second quarter. In the United Kingdom the CIPS/PMI Service Index for September will be published. The European Union will release PMI Composite and Retail Sales data and in the US the ADP Employment Report and the ISM-Non-Manufacturing Index are expected.
Turkey is publishing its CPI and PPI data, while in South Africa the Standard bank will release the results of its PMI survey. In the Asian-Pacific trading session Australia will release its Merchandise Trade Balance.
After hitting a 7-weeks-low on Tuesday, the EUR/USD started a recovery, spurred by a weaker dollar. The euro was recently under pressure especially over Italy’s plan to increase public spending and thus its deficit. As it stands, Italy has one of the highest debt to GDP ratios in the European Union, raising concerns over the sustainability of such policies, especially if the central bank would increase interest rates in the coming years up from the current zero interest policy. Lack of investor confidence about such plans can be seen in the sharp rise of Italy’s 10 Year Bond yield, which rose from last week by close to 0.5%, making the yield the highest of major economies in the euro zone after Greece. It was reported that the Italian Prime Minister Conte will meet with some of his ministers on Wednesday, to have further discussion about the budget.
On Wednesday Italy will also report its Gross Domestic Product (GDP) for the second quarter. The European Union will release PMI Composite and Retail Sales data and in the US the ADP Employment Report and the ISM-Non-Manufacturing Index are expected.
Gold
Gold prices had a significant upside during just a few hours during the regular trading session on Tuesday. Analysts gave the concerns surrounding the deficit situation in Italy as one possible factor pushing prices higher. Another possible factor was a speech by the Chairman of the Federal Reserve, where he indicated that the low unemployment would not force the Fed to aggressively raise rates.
As gold is predominantly traded in dollar, events moving the dollar can also have an impact on gold prices. On Friday the Nonfarm Payrolls (NFP), the Unemployment Rate, Average Hourly Earnings, Average Work Week and Trade Balance statistics will be released in the United States.
WTI Oil
After the rally on Friday and Monday, where oil prices traded at the highest level in almost four years, the upwards movement took a break as crude oil modestly declined. Data from the American Petroleum Institute (API) about crude oil stockpiles had barely any impact on the market, as the report indicated a stockpile increase by 0.9 million barrels over the previous week.
Markets are reacting increasingly nervous about the US sanctions against the Iranian oil sector, which are due to kick in at the beginning of next month. An increasing number of analysts is questioning, whether other OPEC countries, especially Saudi Arabia, would have the capacity to offset the shortfall in global supplies from Iran. Recent reports indicated that the Chinese Sinopec oil company is significantly reducing oil shipments from Iran. Before it was generally assumed that China would continue importing oil from Iran and disregarding US sanctions.
On Wednesday the Energy Information Agency (EIA) will release its weekly statistics about the change in crude oil, gasoline and distillate stockpiles in the US.
US 500
Most major US stock indices traded lower during regular trading hours on Tuesday, with the exception of the Dow Jones Industrial Average (US 30), which however captures only the performance of a basket of 30 shares.
Overall especially Consumer Discretionary (US Cyclicals ETF -1.40%), while on the other side utility sector stocks (US Utilities ETF +1.37%) were some of the best performing equities in that trading session.
The two major central processor unit manufacturers AMD (-7.90%) and Intel (NASDAQ:INTC) (+3.60%) moved in the opposite direction during the trading on Tuesday. While analysts give AMD credit for significant gains of market share over Intel, some analysts downgraded the price target for AMD, given estimates limited gains over the short term. While Intel also received negative price target from analysts on Tuesday, after the company’s CFO reassured the market that the company has enough chip supply in order to meet the set revenue forecast for this year.
More and more companies are starting to disclose their quarterly earnings, with PepsiCo (NASDAQ:PEP) showing better earnings estimates in the data released on Tuesday and this week Costco (NASDAQ:COST) following also with quarterly earnings on Thursday. Next week some major banks like JPMorgan Chase (NYSE:JPM) and Citigroup (NYSE:C) will release their earnings.
