Market movers today
Today is a relatively quiet day on the data front. Markets will keep an eye on trade headlines and a range of ECB and Fed speakers during the day.
In the euro area the final October Service PMI figures will be released, giving some clues about the health of the services sector in the periphery countries. We also remain sceptic that German factory orders for September will show that a bottom in the manufacturing slump has been reached yet.
Selected market news
US ISM non-manufacturing rose to 54.7 from 52.6 and more than the 53.5 expected by consensus. In addition, both the employment and new order sub-indices recovered. Meanwhile, the Markit US service PMI for October was revised down to 50.6 – a new cycle low and the composite PMI was revised down to 50.9. Hence, the two leading indicators sent somewhat mixed signals about activity in the US service sector.
The market took the lead from the former and the USD rallied, notably with EUR/USD going firmly below 1.1100 and USD/JPY above 109, as US yields rose further. The market also lowered its expectations of more Fed cuts over the coming months.
A couple of Fed officials spoke yesterday. Dallas Fed’s Robert Kaplan took comfort in the recent steepening of the US yield curve, which he saw as a sign that the Fed now has the right policy in place. Richmond Fed’s Thomas Barkin stressed that recent rate cuts should not be seen as a sign that a recession is imminent. Rather it was a reaction to various uncertainties about the economic outlook.
The price of Brent crude briefly touched the USD63/bbl level yesterday – the highest level since the oil price surge in September when Saudi Arabian crude production facilities were attacked. Weekly inventory figures from the American Petroleum Institute showed a large increase last week, which tempered the positive sentiment in the oil market.
