Daily Market Update – Thursday 3rd March 2016

Yesterday / Overnight News

  • Market sentiment remained positive overnight, supported by the recent trend of better than expected US data releases. Asian equities traded higher for the 3rd consecutive day with strength seen in energy and financials supporting the global risk on sentiment. This was in spite of a fall in China’s Caixin services PMI survey to 51.2 from 52.4.
  • In FX, the AUD/USD traded higher after breaking above its 200 Daily Moving Average yesterday to regain the 0.7300 handle following better than expected Australian trade figures, while gains in commodity prices also supported related currencies. The USD/JPY and Yen crosses rebounded from yesterday’s lows as widespread risk on sentiment saw outflows from the safe haven Yen.
  • WTI crude traded sideways overnight to hold on to yesterday’s gains, where a decline in US output counter balanced a significantly larger than expected DoE inventory build and helped push oil to its highest close in nearly 2 months.
  • In the US, the Fed’s Beige Book stated that labour market conditions continue to improve and that economic activity has improved in most districts. It added that consumer spending rose in a majority of districts and consumer prices held steady in most districts. The Fed’s Williams, who is a non-voter, said that wage growth is starting to pick up but the Fed do not want to raise rates too quickly.

What to Watch for Today and for the week ahead

  • European markets are expected to be mixed this morning with cautious investors failing to be buoyed by optimism which sent Asian markets higher overnight.
  • The services PMI survey is the key release from the UK today and, following on from the Lloyds Business Barometer and negative surprises to the manufacturing and construction PMI surveys, there is probably a downside risk to the data which is forecast to be at 55.2. A fall in this number would increase the likelihood that UK GDP growth may soften in Q1.
  • The US ISM non-manufacturing survey will also be closely watched, partly for the employment component which may offer more clues on the likely outcome for the nonfarm payrolls release tomorrow. Also, after the separate Markit services PMI report last week which was surprisingly weak, markets will be seeing to what extent this will also be reflected in today’s ISM survey. US weekly initial jobless claims and factory orders will also be released today.
  • Euro area services PMI is also due, but they are final estimates and are expected to be unrevised at 53.0, down from 53.6 in January.
    Finally, on the corporate front today we have full year 2015 earnings releases from Adidas AG, Travis Perkins Plc, Admiral Group Plc, Continental AG, Schroders Plc, Whitbread Plc and Kroger Co, a Q2 2016 earnings release from Costco Wholesale Corp, a Q1 2016 earnings release from Hewlett Packard Enterprise Company and, finally, a February 2016 corporate sales release from GAP Inc.

Economic Data Release Schedule

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Trade Of The Day

EUR/USD:

The Euro has been range bound against the greenback in recent trade after weaker European inflation data pushed it lower at the start of the week. Traders are now awaiting the much anticipated jobs data which is due out of the US tomorrow afternoon and we could see the price continue to range up until then. Technically, we are tracking a falling resistance trend line and we are looking to sell at another test of this line at around the 1.0871 area with a stop loss just above here at the 1.0884 area. We will look to bank our profits on the way down at the 1.0852, 1.0835 and 1.0825 support levels respectively.

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