Weekly Wrap – A Heavy Economic Calendar Tested the Market BullsDire economic data throughout the week tested the majors. A fall in the U.S unemployment rate eased the pain on Friday, but only a little.
It was a particularly busy week on the economic calendar in the week ending 4th October.
A total of 74 stats were monitored throughout the week, compared with 44 in the week prior.
Of the 74 stats, 24 came in ahead forecasts, with 41 economic indicators coming up short of forecast. 9 stats were in line with forecasts in the week.
Looking at the numbers, just 24 of the stats reflected an upward trend from previous figures. Of the remaining 50, 43 stats reflected a deterioration from previous.
With the economic data was skewed to the negative, the Dollar struggled in the week, as NFP and private sector PMI numbers missed the mark.
The U.S Dollar Index (“DXY”) fell by 0.27% to end the week at $98.840.
Out of the U.S
It was a busy week. September Chicago PMI figures kicked the week off. Particularly weak numbers had a relatively muted impact on Monday ahead of ISM PMI numbers later in the week.
Following some particularly dire manufacturing PMIs from the Eurozone, U.S manufacturing PMIs weighed on Tuesday.
An acceleration in the pace of contraction in the U.S manufacturing sector sent the markets into risk-off mode. The ISM Manufacturing PMI fell from 49.10 to 47.8 in September.
ADP nonfarm payroll numbers on Wednesday failed to shift sentiment. According to the ADP, nonfarm payrolls rose by just 135K in September, falling short of a forecasted 140k. A downward revision to August numbers didn’t help.
ISM non-manufacturing PMI numbers on Thursday also intensified risk aversion. The PMI fell from 56.4 to 52.6. As a key contributor to the U.S economy, a slide in the new orders sub-index from 60.3 to 53.7 was key to the Dollar demise.
Following dire manufacturing numbers earlier in the week, factory orders also influenced on Thursday. August’s orders fell by 0.1%, which was better than a forecasted 0.2%. Orders had risen by 1.4% in July…
If the markets were looking for some support, Friday’s nonfarm payroll and wage growth numbers failed to deliver.
Wage growth slowed from 3.2% to 2.9%, year-on-year, with only 136k nonfarm payroll jobs added. Economists had forecast an increase of 145k.
A fall in the U.S unemployment rate from 3.7% to 3.5% supporting risk appetite on the day.
The Dollar may have been the safe haven of choice, but weak stats and sentiment towards the U.S economy ultimately sank the Greenback in the week.
In the equity markets, it was a mixed week for the U.S majors. The Dow and S&P500 ended the week in the red for a 3rd consecutive week, while the NASDAQ gained 0.54%. The S&P500 and Dow fell by 0.92% and 0.33% respectively.
Out of the UK
It was also a busy week on the economic calendar.
Economic data included 3rd estimate 2nd quarter GPD numbers on Monday and private sector PMIs through the week.
While the UK economy contracted in the 2nd quarter, of greater concern was an accelerated contraction in the UK services and construction sectors.
The only good bit of news for the UK economy was a slower pace of contraction in the manufacturing sector.
While the numbers were on the slide, however, UK politics and Brexit chatter were the key drivers.
The Pound ended the week up by 0.32% to $1.2331.
For the FTSE100, a stronger Pound added pressure on the 100, with the index falling by 3.65%.
Out of the Eurozone
It was a particularly busy week on the economic data front.
On Monday, Germany was in focus, with retail sales, unemployment and inflation figures providing direction.
It was a hopeful start to the week, with retail sales rising by 0.5% and unemployment falling by 10k.
Even the Eurozone’s unemployment rate fell from 7.5% to 7.4%.
Softer prelim inflation figures for September raised an early red flag, however.
On Tuesday, manufacturing PMIs hit risk sentiment. There was nothing positive in the numbers ultimately weighing on risk sentiment through to the service PMI numbers on Thursday.
A light economic calendar on Wednesday had little influence ahead of another slew of disappointing economic data on Thursday.
Service sector PMI and composites fell further, with Germany’s private sector sitting at the bottom of the Eurozone table.
The only positive on Thursday was a 0.3% monthly rise in the Eurozone’s retail sales.
While the numbers were dire in the week, U.S stats were even worse, ultimately giving the EUR support.
For the week, the EUR rose by 0.35% to $1.0978.
For the European major indexes, the DAX30 slid by 2.97%, with the EuroStoxx600 and CAC40 down by 2.95% and 2.70% respectively.
It was a steadier week for the Aussie and Kiwi Dollars.
The Aussie Dollar rose by 0.10% to $0.6771, while the Kiwi Dollar gained 0.38% to $0.6320.
For the Aussie Dollar
It was a relatively busy week for the Aussie Dollar.
On the economic data front, private sector credit, trade data, and building approvals were negative ahead of retail sales figures on Friday.
Retail sales rose by 0.4%, month-on-month, in August. While falling short of a forecasted 0.5% rise, a rebound from a 0.1% fall in July eased the pain.
While the numbers skewed to the negative, a hawkish RBI rate cut delivered support on Tuesday.
The direction in the week ultimately boiled down to sentiment towards monetary policy divergence. Dire stats out of the U.S suggested that the FED may need to ramp up easing in the coming months.
For the Kiwi Dollar
The stats were skewed to the negative in the week. Business confidence weakened in the 3rd quarter and in September. Weaker confidence came in spite of RBNZ rate cuts, raising concerns over business investment near term.
Negative sentiment towards global trade weighed on business sentiment.
In spite of the negative numbers, however, upside came from the weak stats from the U.S.
For the Loonie
Stats included RMPI and GDP numbers in the first half of the week. Negative numbers failed to sink the Loonie, however, with economic data from the U.S offsetting the weak numbers.
At the end of the week, trade data and September’s Ivey PMI delivered mixed results. Whilst the trade deficit narrowed in August, Canada’s Ivey PMI slid from 60.6 to 48.7 in August.
The Loonie ended the week down by 0.51% to C$1.3314 against the Greenback, with sliding oil prices ultimately weighing.
For the Japanese Yen
It was a mixed start to the week. While August industrial production tumbled, retail sales bounced back in August.
Better than expected retail sales figures were unlikely to shift the BoJ’s planned monetary policy moves, however.
Sales tax hikes likely contributed to the August spike.
On Tuesday, a particularly busy day saw the Tankan numbers reflect weaker conditions in the manufacturing and services sectors.
The numbers may have been better than forecast, but weakness ultimately supported the BoJ’s anticipated easing.
On Thursday, the service sector PMI’s added to the market angst late in the week.
Risk aversion ultimately prevailed in the week, giving the Yen the upside against the Greenback.
For the week, the Japanese Yen rose by 0.91% to ¥106.94.
Out of China
It was a busy Monday ahead of a week-long holiday.
Key stats on Monday included September private sector PMI numbers.
Better than forecasted numbers provided support to the markets in the early part of the week before risk aversion took hold.
While the NBS non-manufacturing sector PMI slipped from 53.8 to 53.7, it was positive for the manufacturing sector PMIs.
The NBS manufacturing PMI rose from 49.5 to 49.8, with the Caixin manufacturing PMI rising from 50.4 to 51.4.
It may have been a positive for the numbers, but news of the U.S planning to pin back investments into China weighed.
The Yuan fell by 0.36% to CNY7.1483 against the Greenback.