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Weak reports got nothing on global trade optimism! Thanks to a last-minute NAFTA deal, the bulls are starting the trading month on a strong note.

  • China’s markets out on a holiday
  • Most Australian banks out on Labor Day holiday
  • China’s manufacturing PMI slips from 51.3 to 50.8 in September
  • China’s non-manufacturing PMI up from 54.2 to 54.9 in September
  • Caixin manufacturing PMI dips from 50.6 to 50.0 in September
  • Japan’s Tankan manufacturing index lower from 21 to 19 in Q3 2018
  • Japan’s Tankan non-manufacturing index dips from 24 to 22 in Q3
  • Japan’s final manufacturing PMI decreases from 52.9 to 52.5 in September
  • AU AIG manufacturing index jumps from 56.7 to 59.0 in September
  • AU MI inflation gauge up by 0.3% vs. 0.1% gain in September

Major Events/Reports:

NAFTA deal reached?

Reuters cites “sources with direct knowledge of the talks” in confirming that the U.S. and Canada have reached a deal over the weekend.

Word around is that the “framework deal” involves the U.S. getting more access to Canada’s dairy markets while Canada caps its auto exports to the U.S.

In return, Canada gets to keep a provision preserving its cultural industries and that the U.S. would lift its steel and aluminum tariffs.

We have yet to see the details but, for now, traders are happy with the two sides meeting the U.S.’ Sunday deadline and avoiding a trickier confrontation between the trading partners.

Weak manufacturing reports

Manufacturing data from all over Asia highlighted the region’s sensitivity to the U.S.-China trade war.

Official reports printed from China showed the manufacturing sector cooling down in September to its slowest reading since February. A closer look tells us that the exports subindex fell to its lowest since 2016.

The non-manufacturing sector did a bit better, clocking in at 54.9 when analysts had only seen in at 54.0. However, Caixin’s reading came in at 50.0, the lowest since May 2017, as exports declined at a faster rate and business confidence slid to a nine-month low. Yipes!

Meanwhile, a quarterly survey among Japan’s largest manufacturers worsened for a third straight quarter on trade war concerns. Large non-manufacturers were also less optimistic, thanks in part to a string of natural disasters that hit the country in early September.

Overall risk appetite

The Australian and Chinese markets are out on holidays, but that didn’t stop market players from starting a brand new trading month on a strong note.

Nikkei, in particular, rose to its highest levels since 1991 on a weak yen and an improvement in risk sentient. Meanwhile, Hang Seng is also up as U.S. and Canada established a framework deal over the weekend.

  • Nikkei is up by 0.54% to 24,251.2
  • Hang Seng is up by 0.26% to 27.788.5

Commodity prices were also in the bull party, with gold taking advantage of a bit of dollar weakness and crude oil benchmarks still being supported by Iran’s sanctions scheduled next month.

  • Gold is down by 0.14% to $1,188.72 per troy ounce
  • Brent crude oil is up by 0.35% to $83.14 per barrel
  • U.S. WTI is up by 0.04% to $73.52 per barrel

Major Market Mover(s):

CAD

Not surprisingly, talks of a deal between Canada and the U.S. propelled the Loonie higher across the board.

USD/CAD is down by 74 pips (-0.57%) to 1.2834; CAD/JPY is up by 71 pips (+0.81%) to 88.76; GBP/CAD is down by 96 pips (-0.57%) to 1.6723; NZD/CAD is down by 49 pips (-0.57%) to .8490; CAD/CHF is up by 44 pips (+0.58%) to .7648, and EUR/CAD is down by 96 pips (-0.64%) to 1.4881.

JPY

The low-yielding yen took hits against its major counterparts as start-of-month positioning and traders’ optimism over a NAFTA deal drove investors to buy higher-yielding assets.

USD/JPY is up by 24 pips (+0.21%) to 113.92; EUR/JPY is up by 20 pips (+0.15%) to 132.09; GBP/JPY is up by 33 pips (+0.22%) to 148.44; AUD/JPY is up by 13 pips (+0.16%) to 82.23; NZD/JPY is up by 16 pips (+0.21%) to 75.36, and CHF/JPY is up by 29 pips (+0.25%) to 116.05.

Watch Out For:

  • 6:00 am GMT: Germany’s retail sales (0.4% expected, -0.4% previous)
  • 7:15 am GMT: Switzerland’s retail sales (y/y) (0.4% expected, -0.3% previous)
  • 7:15 am GMT: Spain’s manufacturing PMI (52.7 expected, 53.0 previous)
  • 7:30 am GMT: Switzerland’s manufacturing PMI (62.6 expected, 64.8 previous)
  • 7:45 am GMT: Italy’s manufacturing PMI (50.3 expected, 50.1 previous)
  • 7:50 am GMT: France’s final manufacturing PMI to remain at 52.5?
  • 7:55 am GMT: Germany’s final manufacturing PMI expected to maintain 53.7 reading
  • 8:00 am GMT: Euro Zone final manufacturing PMI to retail 53.3 reading?
  • 8:00 am GMT: Italy’s monthly unemployment rate (10.5% expected, 10.4% previous)
  • 8:30 am GMT: U.K.’s manufacturing PMI (52.6 expected, 52.8 previous)
  • 8:30 am GMT: U.K. net individual lending (4.8B GBP expected, 4.0B GBP previous)
  • 8:30 am GMT: U.K. mortgage approvals (65K expected and previous)
  • 9:00 am GMT: Euro Zone’s unemployment rate (8.1% expected, 8.2% previous)