US stocks, oil prices, and commodity currencies are all softer on the day as investors grow nervous about the US economy and eagerly await further details on the US-China trade front.
The recent rise in global equities has stemmed from a mixture of trade optimism, accommodative monetary and fiscal policies from China, confidence the Fed is on hold and signs that other advanced economies are delivering dovish shifts. Softness in the US economy is also weighing on the equity rally. The pressure is on for President Trump and Xi to deliver a trade deal that will allow markets to move forward and not have to worry about punitive tariffs making the trade war become a regular thing.
Commodity currencies got hit hardest today with Australian dollar and loonie leading declines against the greenback.
The Fed’s Beige book noted that 10 of 12 districts saw slight-to-moderate growth. Half of the regions noted the government shutdown slowed activity down, this does not surprise anyone. A few Districts continued to report upward price pressures from tariffs on certain goods and services. Employment increased in most Districts, with modest-to-moderate gains in a majority of Districts and steady to slightly higher employment in the rest. This could suggest we won’t see continued blockbuster employment numbers.
Oil is down on the day, but still stuck in a sideways range as markets eagerly await further details on the trade front. Oil has also been hampered by rig counts falling to a 9-month low and inventory data starting to show signs of potential glut. Today’s EIA weekly data reading saw inventories rise by 7.1 million, greater than all economist forecasts and evens out last week’s drawdown which ended up being influenced by heavy fog in Houston that delayed imports.