Europe
Markets in Europe have got off to a negative start to the new month despite the latest China manufacturing private sector survey showing a modest rebound into expansion territory in August.
European automakers are acting as the largest drag with the DAX and CAC40 underperforming after UBS cut Volkswagen and Renault to sell, citing the impact of Chinese automakers when it comes to electric vehicles, while BMW is lower after getting cut by Citi, due to concerns over weaker demand.
Away from the DAX the FTSE100 has rebounded from yesterday’s decline helped by a buoyant basic resource and energy sector, with oil prices back at their highest levels this year, helping to lift BP and Shell, with Rio Tinto and Glencore also firmer on the back of higher copper prices.
We also got a risk lift from the latest US payrolls report which showed that 187k jobs were added in August, along with significant downward revisions to July and June, which have helped raise expectations that the Federal Reserve will pause in September, and not hike again.
Johnson Mathey shares are the best performers on the FTSE100 after Standard Investments doubled its stake in the business to just over 10%, raising the prospect that the company might be subject to a possible bid or that pressure will build for a partial breakup of the business.
Admiral Group is the worst performer, slipping from 1 year highs after it was reported that Marshall Wace had taken a 0.52% short position in the insurer.
US
US markets opened higher and yields fell back despite the August payrolls report coming in at 187k, slightly above expectations.
The decline in yields came about as a result of a sharp rise in the unemployment rate from 3.5% to 3.8%, although part of that can be explained by a rise in the participation rate to 62.8% from 62.6%, putting US worker participation in the workforce at its highest level since the US economy reopened after Covid.
We also saw sharp revisions lower to the June and July payrolls report, with July revised down to 157k from 187k, while June was revised down from 185k to 105k. Wage growth was also softer at 4.3% pointing to a welcome slowdown as far as the Federal Reserve is concerned when it comes to the narrative surrounding the US economy. This would suggest we’ve probably seen the last of Fed rate hikes for this economic cycle, with the narrative now likely to shift to when we can expect the first rate cut.
Broadcom shares have slipped back in spite of beating forecasts on its Q3 trading update. Revenues came in at $8.88bn, while profits rose to $10.54c a share, with chip sales accounting for $6.94bn of that figure. The disappointment appears to be around guidance which had the chip maker projecting Q4 revenue of $9.27bn, which while still a record was in line with consensus views. With the shares close to record highs, there appears to be a sense that markets were looking for more given the hype around growth in AI.
In the retail space Lululemon has seen its shares edge higher after raising its revenue and profits guidance for Q3 and the rest of the year, after beating on its Q2 numbers. Q2 revenues came in at $2.12bn, with profits coming in at $2.68c a share.
Full revenue was raised to between $9.51bn and $9.57bn, up from consensus $9.5bn and profits raised to $12.02 to $12.17, up from $11.92 consensus.
and their Q2 numbers, with the hope that there will be a similar market reaction to the one we saw in Q1, when the company raised its guidance for Q2 to between $2.14bn and $2.17bn and for annual revenues to increase to $9.47bn, with annual profits expected to rise to between $11.74 and $11.94 a share.
FX
The US dollar slipped back initially, along with yields after a softer than expected payrolls report, which saw unemployment rise to 3.8%, and downward revisions to the June and July payrolls numbers. The slide proved short-lived ahead of the long US labour day holiday weekend. The main exception has been the Canadian dollar which has slipped back after the Canadian economy posted a weaker than expected GDP number for June. Year on year the Canadian economy expanded by 1.1%, a sharp slowdown from the 1.9% in May, and below expectations of 1.4%. The monthly decline of -0.2% in Canadian GDP also suggests that the Bank of Canada will keep rates on hold at 5% next week.
The pound is also underperforming after chief economist Huw Pill indicated that he wasn’t in favour of further rate hikes and was leaning more towards an approach of keeping rates at current levels for longer in order to get inflation under control. This outbreak of common sense, if that’s what it is has seen traders start to price out the additional two rate hikes that are priced in from the Bank of England for the rest of this year. It also raises the prospect that the Bank of England could well be done when it comes to more rate hikes.
Commodities
Apparent confirmation that OPEC+ members look set to extend their recent production cuts into October, has helped push oil prices towards their highest levels this year with the January peaks at $89 a barrel within touching distance. A weaker US dollar is also helping to underpin prices with OPEC+ members playing a dangerous game when it comes to the current state of the global economy, which is starting to splutter. A move through $90 could well cause demand destruction and exacerbate a slowdown as we head into the winter months.
Gold prices have risen to one-month highs on the back of today’s US payrolls report with the decline in yields reflecting the idea that the Fed need do no more when it comes to hiking rates further. This relief rally in the bond markets, along with the weaker US dollar could be the beginning of investors looking past further rate rises and focussing on how long before rates start to fall again.
Volatility
Price action was somewhat lacking across the board on Thursday with only a limited number of highlights. Canoo, the EV maker who we flagged earlier in the week was one example with the stock declining more than 12% on the day, giving back around half of Monday’s gains. One day vol here printed 177.15% against 166.81% for the month.
Cannabis stocks found more support on Thursday with CMC’s proprietary basket of licensed growers advancing to more than three-month highs as a result. That’s still being driven off the back of recommendations that the US legalise marijuana. One day vol on the basket printed 101.66% against 100.12% for the month.
Cryptos gave back most of their gains posted earlier in the week, with price action on some select Altcoins dominating. Litecoin was something of a stand out as it returned to two-week lows. One day vol advanced to 93.93% against 70.69%, significantly higher than the one-day print seen for Bitcoin of 37.6%.
And for commodities, sugar prices remain in focus. Profit taking continues to see the gains posted earlier in the month being eroded despite concerns over tightening supply moving towards the year end. One day vol sat at 41.1% against 37.08% for the month.
(This story was corrected on September 12 at 07:30 GMT to say that June US payroll data was revised down from 185k to 105k, not from 209K.)
Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Recommended Content
Editors’ Picks
EUR/USD gathers fresh upside traction and approaches 1.0580
Following an early dip to a new 2024 low at 1.0495, EUR/USD manages to regain some balance and retests the area of daily peaks near 1.0580 as the US Dollar's initial uptick seems to have run out of steam.
GBP/USD reclaims the 1.2700 barrier and above
In line with the rest of its risk-related peers, GBP/USD leaves behind the initial drop to multi-month lows near 1.2630 and attempts a move beyond 1.2700 the figure amidst renewed weakness in the Greenback.
Gold trims early losses hovers around $2,575
The loss of momentum in the US Dollar and the retracement in US yields across the curve allow Gold prices to pick up some upside traction and revisit the $2,570 zone per ounce troy, trimming part of their early losses.
Missing crypto influencer Kevin Mirshahi found dead in Montreal Park
Authorities report that the remains of Kevin Mirshahi, a prominent crypto influencer who was abducted in June, have been found in a Montreal park. Local police informed “The Gazette” that a passerby found the grim discovery on October 30 in Île-de-la-Visitation Park.
Trump vs CPI
US CPI for October was exactly in line with expectations. The headline rate of CPI rose to 2.6% YoY from 2.4% YoY in September. The core rate remained steady at 3.3%. The detail of the report shows that the shelter index rose by 0.4% on the month, which accounted for 50% of the increase in all items on a monthly basis.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.