Optimism Surrounding US Manufacturing, Big Tech Gains Spills Into Europe, Oil Drags

Stock are in rally mode after upbeat US manufacturing data and big tech gains

Charts (4)

A strong finish on Wall Street spilled over into Asia and now European stocks are pointing to a broadly higher start.

Better than forecast US manufacturing data calmed fears that the rising number of coronavirus cases there was hampering the economic recovery. Whilst this is just the first data point of many this week, it is at least a step in the right direction. The figures boosted risk sentiment lifting stocks whilst also providing a rare up day for the greenback. 

Big tech reigned supreme overnight, leading the Nasdaq to yet another all time high. The sector got a boost as Microsoft looked to pursuit a deal to buy Tik Tok before the Trump administration closes the video app on 15th September. 

RBA holds steady
Overnight the RBA, as expected kept interest rates on hold. Whilst RBA governor Dr Philip Lowe warned of the deepest recession since the 1930’s, he also repeated that the downturn hadn’t been as severe as initially feared. With Melbourne back under lockdown, what is clear is that the road to recovery will be long and bumpy. The outbreak in Victoria will impact on the Australian economy. Dr Lowe indicated that more stimulus both fiscal and monetary would be needed and for some time to pop up the economy.
The Australian Dollar is advancing following the central bank’s update, supported in part by the weaker US Dollar.
Whilst the greenback jumped in the previous session thanks to strong manufacturing data, the move higher was short lived. Today the Dollar index has returned to that all familiar negative territory. With little progress over on Capitol Hill, the greenback is remaining out of favour. The Democrats and Republicans have failed to agree on the new rescue package. With summer recess starting on Friday, the clock is ticking.

Oil slides
Oil is slipping lower on Tuesday amid fresh concerns that the rising coronavirus case across the globe could see lockdown measures tightened and demand for fuel stall just as major producers are ramping up production. 
Whilst on the one hand encouraging manufacturing data from Asia, Europe and the US is supportive of oil prices, fears concerning future demand is acting as a drag. With Manila and Melbourne for example tightening lockdown measures and Norway halting cruise ship traffic, fears are growing that global demand could start to move in the wrong direction.
At the same time, the OPEC+ group are stepping up out put this month with plans to produce around 1.5 million more barrels a day.
With demand waning under covid and OPEC upping supply, expectations are for the price of oil to come under increasing pressure.

Looking ahead
There is little on the economic calendar to grab investors attention. With Eurozone producer prices in focus in the European session. 
Concerns over rising coronavirus cases could hamper both the Pound and sentiment in the UK after 938 new coronavirus cases were reported on Monday, the highest number since June.

FTSE Chart


From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.