- Empire manufacturing index for August -31.3 vs. 5 estimate
- NAHB August US housing market index 49 vs 55 expected
- US State Dept: Only way to Iran deal is for Tehran to abandon extraneous demands
- Canada home sales volumes fall 29.3%
- Canada June manufacturing sales -0.8% vs -1.0% expected
- German economy min: Have to swallow bitter medicine to make shift to new energy model
Markets:
- Gold down $22 to $1779
- US 10-year yields down 5 bps to 2.80%
- WTI crude oil down $2.87 to $89.22
- S&P 500 up 16 points to 4297
- CHF leads, AUD lags
The mood in early US trading was dark and seemingly darkening as worries about the strength of the Chinese economy percolate. It looked like risk assets might dive as futures struggled. That was compounded by terrible Empire Fed data followed later by disappointing home builder sentiment numbers.
All the elements were in place for a poor day but the bulls stood their ground and equities reversed losses with tech leading the way.
The FX market followed that same path but was much less enthusiastic on the rebound. Commodity currencies and USD/JPY bounced but the finishing levels are still deeply red.
The euro is also worrisome as it failed to bounce at all and finished near the lows. The catalyst there is likely another 10% rise in TTF prices to a new record close. The euro failed in its upside breakout last week and is now approaching the bottom of the range.
Cable also closed on the lows in an 80-pip decline as 1.20 proves increasingly magnetic. Energy problems are a tough fix and worry about slow growth won't be solved until there's a pickup.
Overall, I'm more inclined to take a signal from FX rather than equities. The news flow today on China, the US and Europe was concerning and the shorts have been squeezed enough. Yen crosses are sending some concerning signals, like NZD/JPY's failure to test the June highs and that's where I'll be watching in the day ahead.
