The dollar further extended its gains against other major currencies, with the US Dollar Index (USDX), which measures the performance of the USD against six other currencies, closing now for the sixth day in a row higher.
Gold prices had only a limited downside, falling marginally below the $1,200 level. This comes despite the strengthened dollar and significantly higher yields on US Treasury Notes, which are normally seen as negative for the US dollar value of the precious metal.
While equity indices closed mixed on Wednesday, the majority was seen trading lower as equity index futures on Thursday morning. Japanese, Chinese and Hong Kong indices such as the Hang Seng Index (Hong Kong 50) were in particular under pressure over the continued trade dispute between the US and China and the Japanese Services PMI showing the slowest growth in two years as the index fell to 50.2.
Cryptocurrency markets edged overall higher in the night from Wednesday to Thursday, with Bitcoin again trading above $6,500.
On Thursday in the US the challenger Job-Cut report, Jobless New Claims, Factory Orders and data on from the Federal Reserve Bank will be released. In Canada the Ivey Purchasing Mangers’ Index data will be published for September.
The Russian Central Bank will publish its foreign currency reserves and the Mexican Central Bank will announce its interest rate decision, which consensus indicates will remain unchanged at 7.75%.
In the Asian-Pacific trading session Japan will release Household Spending data and Australia its Retail Sales statistics.
A very strong economic performance in the United States as shown by the ADP Employment Report for September showed unexpectedly 230 thousand jobs added to payrolls in the private sector (expected 179 thousand) and the ISM Non-Manufacturing Index up at 61.6 (expected 58.0) adding momentum to the dollar, which brought the EUR/USD to a new 7-weeks low.
Most long term government bonds yielded higher on Wednesday, with the 10 Year US Treasury Note reaching above 3.2% for the first time in seven years. The increasing spread between high grade euro and dollar bonds could also have been responsible for the declining EUR/USD rates, as in theory investors seek to invest in assets generating higher returns.
On Thursday in the US the challenger Job-Cut report, Jobless New Claims, Factory Orders and data from the Federal Reserve Bank will be released.
Hong Kong 50
Despite the relatively limited activity from China, given the celebrations of the National Day Holiday this week, markets in China and Hong Kong were showing significant movements. The strong US dollar and sell-off in government bonds put additional pressure on the equity indices. The Standard Chartered bank (LON:STAN) recently downgraded the forecast for Hong Kong’s GDP growth, given the ongoing trade standoff with the US and rising interest rates.
Stock prices of the Chinese smartphone maker Xiaomi, which only this year went ahead with its IPO in Hong Kong, meanwhile declined for the seventh consecutive trading day, pushing the stock price to a new low.
On Friday Hong Kong will release its Manufacturing PMI and then later its US dollar Foreign Reserves. Next week on Monday China will release its Foreign Reserves data and the Caixin Services PMI is expected.
WTI Oil
After taking a short break on Tuesday, oil prices raced again higher during the trading session on Wednesday, reaching levels last seen in November 2014. Most remarkably, after just a short movement down when the Energy Information Agency (EIA) announced that crude oil stockpiles unexpectedly increased by almost 8 million barrels over the course of last week, the market stabilized and shortly thereafter again pushed higher. Even confirmed reports that all US crude oil exports to China stopped, due to the ongoing trade conflict were unable to stop the upward price momentum.
Only on Thursday the news about an agreement between the top oil producers Saudi Arabia and Russia to increase output was able to bring prices down by a moderate margin for some few hours.
Some analysts speculate whether the US President Trump could order to release some of the Strategic Petroleum Reserve (SPR), given his displeasure with OPEC over continuously higher prices. The SPR holds currently well over 600 million barrels of crude oil.
On Friday the US Baker Hughes Oil Rig Count will be released, which will show the amount of operating oil rigs in the United States.
US 30
US equity indices traded again very mixed in the sentiment of still positive economic growth given the very positive data from the ADP Employment Report and ISM Non-Manufacturing Index, while the higher yield on US Treasury Notes could have also had negative impact on some companies. High yield even on safe haven assets like US government bond, makes in theory an investment in riskier equities less desirable and also raises financing costs for companies, as corporate bonds then normally would need to pay a premium over a higher base-line set by safe government issued securities.
While companies included in the relatively small basket of the Dow Jones Industrial Average (US 30) seemed to be less affected by this move, as the index rallied to a new all-time high, other indices, such as the NASDAQ (US Tech 100) or the S&P 500 (US 500) closed lower in extended trading hours.
Boeing (NYSE:BA) (+1.52%) further extended gain, closing higher for the fifth consecutive day again at a new all-time high. The company recently announced a new deal with the UK government to support the Trident missile program until 2020 and also that its air-taxi prototype will be ready for testing next year vowing ‘rapid progress’ in that direction. Boeing will release its quarterly earnings in around three weeks.
Of the major companies listed on US exchanges, Costco (NASDAQ:COST) is expected to release its quarterly earnings on Thursday after stock markets close.
