Markets Up But Data Looms

Posted on

NZD employment strong beat
ISM Non-Manufacturing on tap
Nikkei -0.26% Dax 0.94%
UST 10Y 0.53
Oil $42
Gold $2035/oz
BTCUSD $11352

Asia and the EU
NZD Unemployment 4% vs. 5.6% eyed
UK PMI Services 56.5 vs. 56.6

North America Open
USD ADP 8:15
USD ISM Non-Manufacturing 10:00

The bid was back in the markets today with equities up by about 50 basis points while the dollar continued to fall against high beta currencies on risk-off flows.

The enthusiasm was stoked by better economic data and hope that political negotiations in DC will yield a deal by the end of the week.

On the eco front, the PMI data out of Europe and UK showed mild positive momentum with final readings coming in slightly better or in line with forecasts, but more importantly well above the 50 boom/bust region as the region is clearly returning back to work.

In New Zealand which has managed to weather COVID much better than any OECD economy the unemployment rate handily beat the 5.6% forecast coming in at 4.0% and helped to push kiwi above the .6650 level. Aussie was above .7200 even as the COVID situation Melbourne remained troubling but below the 700 daily new cases that everyone was expecting.

Overall the tone in the market remains positive as traders fully expect the parties in Washington DC to come to some sort of agreement by the week’s end even as the initial signals on the state of negotiations are neutral at best.

On the eco docket, markets will be looking at the ADP release due at 12:15 GMT as an early read on NFPs at the end of the week as well as the ISM Non-Manufacturing report due at 14:00. The consensus expects further gains in employment albeit at a slower pace as the US economy reopens for business but the situation is highly uncertain given the resurgence of cases in Southwestern US in the month of July that could have derailed many business openings.

If the employment data disappoints it could quickly reverse the feel-good vibes in the market and send equities in the red as it will show that the US economy is weaker than expected and in dire need of further stimulus. For now, the markets continue to give the benefit of doubt to the upside but if the news doesn’t turn positive soon the bulls may run out of ammunition to push the indices higher.

Boris Schlossberg
Managing Director

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