The China driven rally in equities and commodities of the last week appears to be fading. Hong Kong lost 1.4% overnight, Tokyo, which has been trading opposite to China markets in recent days, bounced back by nearly 2.0%. US index futures are down today, falling 0.1%-0.3%, as are most European indices, including losses of 0.4% for the Dax and 0.6% for the CAC. Copper is giving back some of its recent gains, falling 1.4%.
The one big exception has been the UK. Bank of England Governor Bailey suggested that the central bank could take a “more aggressive” path on interest rate cuts if inflation continues to come down. This hint sent the Pound down over 1.25% and boosted the FTSE to a 0.25% gain.
Crude Oil continues to climb today gaining 2.0% to trade near $71.50/bbl. In addition to ongoing concern about conflict in the Middle East, OPEC+ announced yesterday that it is increasing enforcement of existing production quotas which were maintained. Production cuts are expected to start coming off in December following a previously announced plan. Which means that rumors of Saudi Arabia thinking of breaking ranks and opening the pumps did not happen for now.
Service PMI reports have been rolling out overnight and this morning. Results have been mixed. Australia, Japan, the UK and Spain disappointed while France, Germany and Spain beat expectations. US ISM Service PMI (street 51.7) and US factory orders (street flat) are due at 10:00 am EDT.
Heading into tomorrow’s US nonfarm payrolls (street 140K) report, US employment numbers have been mixed. Challenger layoffs announced this morning were slightly improved from last month at 72.8K, while weekly initial jobless claims (225K vs street 220K) was slightly worse than expected. Yesterday ADP payrolls beat expectations. Average hourly earnings are expected to hold steady near 3.8%, but this could potentially accelerate if big labour actions like the current port strike, are able to achieve big wage increases.