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04/09/2024 - 07:28 UTCA modest rise was seen in the dollar against most of its major peers on Tuesday, with the dollar index (USDX) adding another 0.12% to its recent gains and hitting a new two-week high. This followed the release of data showing that U.S. manufacturing activity had risen from an eight-month low in July, although overall factory activity remained sluggish. The forthcoming U.S. payroll figures will be the primary focus for investors this week.
According to the CME's FedWatch tool, the market is currently pricing in a 59% chance of a 0.25% interest rate reduction by the Federal Reserve in September. While a larger cut of 0.5% is seen as less likely at 41%, there is still a significant probability of further easing in November, with odds currently standing above 47.1%.
The U.S. equity market experienced a significant decline on Tuesday following a holiday break, primarily driven by a record $279 billion decrease in the value of Nvidia as investor sentiment regarding artificial intelligence moderated. The US 500 Index, the US tech 100 and the US 30 experienced their largest single-day percentage decrease since the beginning of August.
The main cryptocurrencies by market capitalization, Bitcoin and Ethereum, fell on Tuesday shedding 2.91% and 4.49% of their values respectively as bearish sentiment continues, with reports indicating that historically September is a negative month for crypto. The overall cryptocurrency market capitalization declined to $2.07 trillion at 7:00 AM GMT on Wednesday, down from its June peak of $2.78 trillion.
In the energy sector, both WTI and Brent posted sharp decline on Tuesday, falling by 4.9% and 4.59% respectively, hitting levels last seen in December 2023. Market sentiment declined following Tuesday's ISM data, which revealed that U.S. manufacturing remained sluggish despite an August improvement. In China, the world's largest crude importer, manufacturing activity and new home price growth both slowed to six-month lows in August.
The upcoming week will be marked by the release of several key economic indicators that could significantly impact market sentiment. These include initial jobless claims, non-farm payrolls, and the US unemployment rate. In the earnings calendar, Q2 earnings from Broadcom are due on Thursday.
On Tuesday, the EUR/USD pair continued its downward trajectory, touching two-week lows during intraday trading before closing just below the 1.1050 mark.
Market activity remains subdued as traders await the upcoming US Nonfarm Payrolls (NFP) report, while disappointing US ISM Purchasing Managers Index (PMI) data has rekindled concerns about a potential recession.
In the US, the ISM Manufacturing PMI for August fell short of expectations, posting a reading of 47.2 against the forecasted 47.5. Despite a mild recovery from July’s multi-month low of 46.8, the data failed to inspire market confidence, prompting cautious investors to pull back from recent bullish positions.
Gold prices dropped to their lowest level in over a week on Tuesday, pressured by a strengthening dollar, as investors look ahead to the U.S. non-farm payrolls report, which could influence the Federal Reserve's upcoming policy decision in September.
According to the CME FedWatch tool, there is currently a 63% chance of a 25 basis point (bps) rate cut at the Federal Reserve's meeting on September 17-18, with a 37% probability of a 50-bps cut.
Gold is on track for its best performance since 2020, driven by investor optimism about potential U.S. rate cuts and ongoing concerns about geopolitical tensions in the Middle East.
Market attention is focused on Friday's U.S. payrolls report, along with the ISM surveys, JOLTS job openings, and the ADP employment report due later this week.
Oil prices dropped sharply on Tuesday, reaching their lowest levels in nearly nine months, as indications of a potential resolution to the dispute that has halted Libyan crude production and exports emerged.
Even before the potential return of Libyan supply, oil prices had been under pressure due to concerns that sluggish economic growth in China, the world’s largest crude importer, was dampening demand.
On Monday, China reported that new export orders fell in July for the first time in eight months, while new home prices in August rose at their slowest pace this year.
Additionally, hopes that the U.S. driving season would boost oil prices to new highs this summer have failed to materialize.
U.S. stocks dropped sharply on Tuesday, marking the beginning of one of the market's historically weakest months, as investors braced for upcoming data that could influence the Federal Reserve's decision on interest rates.
Market sentiment took a hit after the Institute for Supply Management's (ISM) report showed that U.S. manufacturing remained sluggish, despite a modest improvement in August from July’s eight-month low.
Traders are now focused on several upcoming labor market reports ahead of Friday’s non-farm payrolls data for August.
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