Prepare for turbulence

For a long time we’ve been warned that the final months of the year will be extremely eventful and if recent weeks are anything to go by, that may be an understatement. With the US election fast approaching, Covid on the rise again and Brexit negotiations reaching a critical point, financial markets are about to get very interesting, indeed.



The labor market recovery is stalling, and pressure continues to grow for Congress to provide more support.  The September nonfarm payroll report will be the last jobs report before the presidential election.  Most leading indicators show the joblessness issue is about to get worse.  Weekly initial jobless claims remain elevated and the labor outlook for the rest of the year looks dismal as the winter wave of the virus will likely bring back many lockdowns and restrictive measures across the country.

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The upcoming jobs report is expected to show 900,000 jobs were created, down from the prior gain 1.37 million in August.  The nonfarm payroll consensus range goes from a decline of 100,000 jobs to a gain of 1.8 million jobs.

US Politics

Democratic presidential candidate Joe Biden and President Donald Trump will have their first presidential debate on Tuesday, September 29th.  Both sides are trying to lower expectations heading towards the three presidential debates.  President Trump has maintained his aggressive attacks on Biden’s acumen, while Biden is likely to focus on his opponent’s handling of the coronavirus pandemic.

Prior to COVID-19, it was a foregone conclusion President Trump would have an easy path towards re-election. The focal point for the debate will be the coronavirus/economy.  Biden’s lead in most battleground states is in the low to mid-single digits. This election has the smallest amount of undecided voters so its impact might be minimal in the polls.


EU continues to see surging Covid cases that’s already weighing on economic activity. More data next week will likely make for difficult reading. ECB has been reluctant to hint at more stimulus but that may not last. Christine Lagarde will speak next week which may offer more insight into how the central bank may respond in the final months of the year.


Talks will continue next week after the UK side pushed back further Parliamentary debates on the Internal Markets Bill until December and only in the event that no-deal Brexit is happening. This episode has frustrated many people in Brussels and London and is widely seen as a negotiating ploy to ensure no-deal is as undesirable for the EU as it will be for the UK. Regardless, time is running out and with only a couple of weeks to go until the EU summit, it’s time for compromise. A deal by mid-October still looks hopeful but then, we’re used to deadlines not being met. Sterling volatility may intensify further in the coming weeks if negotiators play hard ball.


The UK has imposed tighter restrictions and announced new job support measures in an attempt to slow the spread of Covid-19 and reduce the spike in unemployment that will happen at the end of next month when the furlough scheme draws to a close. The economy will naturally take a hit again with restrictions potentially lasting six months. Still, the biggest risk to the currency remains Brexit, or no-deal to be more specific. The next two weeks will be crucial.


TikTok gains injunction to stop US ban from app stores. The US government has until today to respond. It is increasingly unlikely the China Government will approve the US TikTok deal though dealing another blow to US/China relations.

China Industrial Profits released Sunday. A large deviation could cause a spike in volatility on equity and currency markets on Monday morning.

China PMI’s Wednesday should be market positive. China is on holiday for one week from Thursday.

WGBI inclusion will have no noticeable effect on currency.

Hong Kong

Mid-autumn holidays next week. No significant news or data. Ant Financial IPO expected early October after China holiday. HSBC shares hit 1995 lows, fears over money laundering and US/China politics.


Covid-19 continues to wreak havoc on the domestic economy, heightening fears about growth as the stability of the banking system. India has become the no 2 infected country and hit 5 million cases this week with no end in sight.

RBI rate decision Thursday. Expected unchanged as the economy caught in stagflation vice. Potential protests over the farming reform bill that has been snuck through the government by PM Modi.

New Zealand 

No significant data or news.


ANZ Business Conf. and Manufacturing PMI expected to show further improvement. No other news or event risk. Iron and Copper prices are resilient and market supportive.

AUD and Australian equities are moving in lockstep with Wall Street. Wall Street weakness next week threatens AUD/USD key support at 0.7000.Australian markets could rally on strong China data however.


Heavy data week with Industrial Production, Retail Sales and Tanken survey and PMI’s. All are expected to show the economy mired in recession, especially domestic consumer data.

No significant event risk.

USD/JPY regains 105.00 on global equity sell-off and rise in US bond yields.



With risk appetite taking another beating this morning, oil is once again coming under pressure although, broadly speaking, it’s pretty much barely moved since Monday’s close. The sell-off earlier this week came as stock markets were falling aggressively on Covid and lockdown fears. Since then it’s stabilized surprisingly well, or perhaps not so surprisingly.

When the Energy Minister of the most powerful OPEC+ nation is warning the market against shorting oil and suggesting they’ll suffer the consequences, it has the potential to put a floor under the market. I think we’re seeing those words take effect. Whether it lasts is another thing, the group may need to follow through on the threats eventually to be taken seriously and reinforce the floor he’s attempted to put in place.


Gold is slightly lower again this morning and heading back towards $1,850, around where it found support over the last 48 hours. The yellow metal is being pressured by a resurging dollar, which broke out of its downtrend in the middle of this month before stalling. It wasn’t for long though and it’s well and truly taken off this week.

To be clear, this only looks to be a corrective move at this stage but that doesn’t mean we won’t see $1,800 coming under pressure in gold in the not-too-distant future. The shift to a more risk-averse environment is favouring the dollar once again, at the expense of the once safe haven gold. Longer term prospects remain unchanged but in the near-term, the path of least resistance is below.


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