Traders Trying to Pick up the Pace after Monday’s Lackluster Trade

Monday was a bank holiday in Japan and the United States. This led to a choppy, two-sided, but mostly a lackluster trade on below average volume.

Chinese traders returned from a week-long holiday with traders focusing mostly on gold which had plunged during their absence. They also released the Caixin Services PMI report which came in well-below the 53.1 estimate at 50.6.

In the Euro Zone, German Industrial Production came in well-above the forecast at 2.6%. Sentix Investor Confidence was 29.7, higher than the 28.6 forecast. Trading seemed to shut down at the start of the Eurogroup Meetings.

There are no major reports on Tuesday so the highlight of the session may be a speech by Federal Open Market Committee member Neel Kashkari. He is a noted dove and may give a speech on why the Fed should pass on another interest rate hike due to low inflation.

We may see another low volume session on Tuesday since the next major report doesn’t come in until Wednesday when the Fed releases the minutes from its September meeting.

U.S. Stock Indexes

The three major U.S. stock indexes traded mostly lower on Monday as investors paired positions ahead of the start of earnings season. The Dow Jones Industrial Average posted an all-time high before closing lower. The NASDAQ Composite also hit an all-time high before snapping a nine-day winning streak with a lower close. The benchmark S&P 500 posted a tight range before closing lower.

Financial sector shares exerted the most pressure on the markets as investors adjusted positions ahead of the release of earnings data from several banks later in the week. Some of the major financial companies scheduled to report quarterly results this week include BlackRock, Citigroup, Bank of America and Wells Fargo.

U.S. Treasury Bonds

Contributing to the lack of direction in the Forex markets on Monday was the lack of direction from U.S. Treasury markets which were closed due to the Columbus Day holiday. On Friday, U.S. government debt yields surged after the release of the latest Labor Department jobs report that showed budding signs of inflation due to a jump in average hourly earnings.

Forex

The U.S. Dollar Index treaded water most of the session on Monday due to the lack of direction. Traders showed some concern to reports that North Korea may be preparing to launch a long-term missile that may be capable of reaching the U.S. West Coast. The index also reacted to upbeat German data.

Gold

Gold prices spiked higher on Monday, drawing support from geopolitical tensions over North Korea and a weaker U.S. Dollar. However, gains were limited by expectations of another rate hike by the U.S. Federal Reserve later in the year.

Geopolitical tensions are being fueled by concerns over a possible North Korea missile launch and what U.S. President Trump may do in response to a threat from the rogue nation.

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil closed higher on Monday. WTI crude posted an inside move on the charts which suggests investor indecision and impending volatility. Brent crude rebounded from a fresh low to close higher, indicating that the buying may be greater than the selling at current price levels.

Traders spent the day digesting the impact of Hurricane Nate which made landfall over the week-end. According to the U.S. Department of the Interior’s Bureau of Safety and Environmental Enforcement, short-term price support was coming from the United States, where 85 percent of U.S. Gulf of Mexico oil production, or 1.49 million barrels a day, was offline following Hurricane Nate.