Stock Market Under Pressure Macroeconomic Indicators and Geopolitics

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The US market is under pressure of poor data on macroeconomic indicators. Thus, the index of business activity in Chicago was worse than the forecast and reached 47.1 points against the forecast of 50.2 points, which was the lowest value since 2009. This fall has also raised expectations that the Fed will have to use the quantitative stimulus to support the economy.

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The next important committee meeting will be held on October 30. Against this background, the rating agency S&P 500 Global predicts a decline in US GDP to 2.3%. As for the trade deal between the US and China, investors are expecting a summit meeting that is scheduled for October 10–11. However, some experts are skeptical and expect that the issue will not be resolved in the near future.

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Today, data on the change in the number of employees from ADP and the FOMC member John Williams’ speech will be published.

Oil prices showed ambiguous dynamics on October 1, falling under the influence of conflicting factors. The growth of quotes was facilitated by the information that the production volumes of the largest oil producing countries decreased in Q3 2019.

In turn, the rapid recovery in Saudi Arabian production had a negative effect on the instrument. API Weekly Crude Oil Stock report as of September 27 also provided moderate support for quotes. US oil inventories for the week showed a decrease of 5.92 million barrels after rising by 1.40 million barrels over the past period.

ABS REPORT

EUR showed moderate growth against USD on Tuesday, departing from the updated local lows of May 12 2017. The growth of the euro was largely technical in nature, since the macroeconomic background from Europe remained ambiguous. Preliminary data on the Consumer Price Index in September indicated a slowdown in inflation from +1.0% YoY to +0.9% YoY with a forecast of +1.0% YoY. Core CPI, on the contrary, rose from +0.9% YoY to +1.0% YoY, which was in line with forecasts. Manufacturing PMI in the euro area in September fell from 47.0 to 45.7 points, which is the lowest since 2012. Germany was hit harder than others, with its Manufacturing PMI falling from 43.5 to 41.7 points. At the same time, it is worth noting that indexes have long been in the stagnation zone. With the opening of the US session, the euro was boosted by weak data on US business activity in the manufacturing sector. According to data from ISM, in September the indicator crashed from 49.1 to 47.8 points against the forecast of growth to 50.1 points.

GBP/USD

The British pound showed ambiguous dynamics against the US dollar on Tuesday, having managed to update local lows of September 4. The pound was supported by weak data on business activity in the USA, while the British statistics remained contradictory. Markit Manufacturing PMI in the UK in September showed an increase from 47.4 to 48.3 points against the forecast of 47.0 points. Nationwide House Price Index in September decreased by 0.2% MoM after zero dynamics in August. Analysts expected +0.1% MoM. During today’s Asian session, the pair is trading with a decrease. The pound was under pressure from the data on BRC Shop Price Index. In August, prices fell by 0.6% YoY, continuing the previous negative trend of –0.4% YoY.

AUD/USD

The Australian dollar showed an active decline against the US currency on Tuesday, updating record lows of March 2009. The weakening of the instrument was caused by the quite expected RBA move to further mitigate monetary policy: the bank lowered its key interest rate from 1.00% to 0.75%. The regulator’s follow-up statement pointed to growing external economic risks due to the declining global economy, rising protectionist sentiment, as well as increased uncertainty surrounding US-Chinese trade negotiations and the situation with Brexit.

USD/JPY

The US dollar fell against the Japanese yen on October 1, retreating from updated local highs of September 19. The growth of the Japanese currency was facilitated by corrective sentiment for the dollar across the entire spectrum of the market, which intensified with the publication of ambiguous macroeconomic statistics on business activity in the United States. ISM Manufacturing PMI in September crashed from 49.1 to 47.8 points against the forecast of growth to 50.1 points. Japanese statistics on business activity came out better than the forecasts, but could not provide significant support to the yen. Tankan Large Manufacturers Index fell from 7 to 5 points against the forecast of a decrease to 2 points. Tankan Large Non-Manufacturers Index retreated from 23 to 21 points, contrary to forecasts of a decline to 20 points. In turn, the yen was supported by data on the labor market. The Unemployment Rate in the country in August remained unchanged at 2.2%, while analysts had expected it to rise to 2.3%.

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