U.S. indices were under pressure on Tuesday as trader optimism around the upcoming U.S.-China trade talks declined. Shares in the Semiconductors & Semiconductor Equipment (-2.89%), Automobiles & Components (-2.54%) and Banks (-2.36%) sectors got hurt the most. The U.S. expanded its trade blacklist to include some of China’s top artificial intelligence firms on Monday. China’s foreign ministry said to “stay tuned” for retaliation following the blacklist expansion. Crude Oil fell to a two month low on the news. The S&P 500 (2,893.06) trades below its 20d moving average (2,893.06 – negative slope) and 50d moving average (2,938.07 – negative slope).
On the economic data front, U.S. PPI rose 1.4% YoY in September (vs. +1.8% expected and in August), the lowest growth since November 2016, and the core PPI rose 2.0% (vs. +2.3% expected and in August), the weakest since July 2017. The NFIB Small Business Optimism Index fell to 101.8 in September (vs. 102.0 estimated) from 103.1 in August. On Wednesday, investors will focus on the release of the latest U.S. Federal Reserve FOMC meeting minutes.
European markets are expected to open on a flat note.
Foreign Exchange
The US dollar was bullish against most of its major pairs on Tuesday with the exception of the NZD, CHF and JPY. On the economic data front, US PPI for Final Demand dropped -0.3% last month which was lower than the 0.1% estimate compared to 0.1% in August, marking a low not reached since late 2015. The NFIB Small Business Optimism index came in at 101.8 last month which was lower than the 102.0 estimate compared to 103.1 in August. On Wednesday, economists expect US Wholesale Inventories to increase 0.4% in the August Final reading, in-line with the August preliminary reading. We also expect the release of US MBA Mortgage Applications for the week ending of October 4th.
The Euro was bearish against most of its major pairs with the exception of the CAD and GBP. In Europe, the German industrial production rose by 0.3% in August after a 0.4% slid a month earlier (revised from -0.6%). It was expected to be flat.
The Australian dollar was bearish against most of its major pairs with the exception of the CAD, GBP and EUR.
Commodities
After the close of Wall Street, WTI Crude Future (NOV 19) was about flat to $52.24. The contract was below its 20D MA (@ $55.85) and below its 50D MA (@ $55.45).
Gold was up $12.2 to $1505.7. The precious metal was above its 20D MA (@ $1501) and above its 50D MA (@ $1503).
Copper Future (DEC 19) on Comex was about flat to 256.7c/lb. The contract was below its 20D MA (@ 260.12c) and below its 50D MA (@ 259.86c). In Europe, the London Metal Exchange reported its copper inventories decreased 2250 tons to 283350 tons.