General Market Comment
US indices closed lower on Wednesday as the Dow dropped by more than 600pts. Shares in the Semiconductors & Semiconductor Equipment (-6.52%), Media (-5.15%) and Automobiles & Components (-4.5%) sectors tumbled lower. On the economic data front, Markit U.S. manufacturing PMI rose to 55.9 in October (estimated 55.3) from 55.6 in September, Markit U.S. services PMI increased to 54.7 (expected 54) from 53.5 and Markit U.S. composite PMI advanced to 54.8 from 53.9. In addition, new home sales dropped to an annualized rate of 553K units in September (forecast 625K) from 585K in August. Finally, the Federal Reserve released their Beige Book stating that the majority of districts reported a modest to moderate growth in the economic activity based on information collected on or before October 15th. Employers continued to report tight labor markets while manufacturers are raising prices of finished goods as costs of materials are increasing due to tariffs. The S&P 500 (2,656.10) remains at levels below both its 20d moving average (2,824.69 – negative slope) and 50d moving average (2,862.56 – negative slope).
European markets are expected to start on a negative note.
Foreign Exchange
The US dollar was bullish against most of its major pairs on Wednesday with the exception of the CAD and the JPY. On the economic data front, MBA mortgage applications rose by 4.9% in week ended October 19th from a decline of 7.1% in the previous week. In other news, Markit US manufacturing PMI reached a preliminary estimate of 55.9 in October (estimated 55.3) compared to 55.6 in the prior month while Markit US services PMI increased to 54.7 in a preliminary forecast in October (expected 54) from 53.5 in September. Markit US composite PMI advanced to 54.8 in a preliminary estimate in October vs. 53.9 a month earlier. In addition, new home sales decreased to 553K units in September, well below the estimate of 625K units, vs. 585K in August. Finally, the Federal Reserve released their Beige Book stating that the majority of districts reported a modest to moderate growth in the economic activity based on information collected on or before October 15th. Employers continued to report tight labor markets while manufacturers are raising prices of finished goods as costs of materials are increasing due to tariffs.
The Euro was bearish against most of its major pairs with the exception of the GBP. Euro zone manufacturing PMI index fell to 52.1 in October in first reading from 53.2 a month earlier. It was anticipated at 53. Separately, PMI services index declined to 53.5 vs 54.7 in September and 54.5 expected. Euro-zone M3 money supply growth was 3.5% in September, as anticipated, vs 3.4% a month ago.
The Australian dollar was bearish against most of its major pairs with the exception of the NZD, the GBP and the EUR.
Commodities
After the close of Wall Street, WTI Crude Future (DEC 18) was about flat to $66.26. The contract was below its 20D MA (@ $71.85) and below its 50D MA (@ $69.72). The US Department of Energy reported that, for the week ended 19 October, crude oil inventories increased 6346k barrels compared to the previous week.
Gold was up $2.4 to $1232.7. The precious metal was above its 20D MA (@ $1210) and above its 50D MA (@ $1203).
Copper Future (DEC 18) on Comex was down 1.4c to 274.45c/lb. The contract was below its 20D MA (@ 278.37c) and above its 50D MA (@ 273.13c). In Europe, the London Metal Exchange reported its copper inventories increased 1125 tons to 152225 tons.