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Asian Markets Start Month Weaker

Markets Trade in the Red as China PMI’s Contract

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Asian equity markets are trending lower at the start of a new trading month as the twin manufacturing PMI’s from China continue to contract, adding to concerns of a slowdown from the world’s second largest economy. The weak PMI’s also reminded markets today of the sharp selloff that occurred last week which saw global equity markets plunging across the board.

China Manufacturing Slowdown

China's manufacturing PMI, released earlier today showed a contraction indicating that activity in the manufacturing sector slowed down sharply in the month of August. The manufacturing PMI was 49.7, below estimates of 49.8 and down from 50 previously. Simultaneously, the Caixin final manufacturing PMI printed a soft number of 47.3. A PMI reading below 50 indicates a contraction in the sector, which in this case happens to be the manufacturing sector. With exports being a major part of the Chinese economy, the markets were cautious after the soft print. However, considering that last month China devalued the Yuan in a bid to boost the exports, there is a bit of optimism that the manufacturing sector will pick up sooner than later. The cautious sentiment in the market was well reflected in USDJPY which is showing a bearish reversal pattern to be further confirmed if today’s price closes bearish.

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RBA Leaves Interest Rates Unchanged

The Reserve Bank of Australia met earlier today for its monthly monetary policy meeting. The RBA’s cash rate was left unchanged at 2.00% as widely expected. The RBA’s statement reflected on the recent policy moves from China but noted that while economic conditions were soft in parts of Asia, it expects the US economy to continue to surge ahead. The RBA noted that economic conditions in the country were moderate but remained subdued on account of falling commodity prices and moreover that the Australian dollar was adjusting to the significant declines. The board noted that under the current circumstances, it was best to leave the interest rates unchanged but said that the Central bank would continue to maintain an accommodative stance. The RBA’s statement was seen as largely market neutral with the Australian dollar muted following the decision, remaining within yesterday’s highs and lows after briefly touching a session high at 0.7149.

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Canadian GDP Due Later Today

The Canadian monthly GDP data figure is due later today during the American trading hours. Expectations are for Canadian monthly GDP growth to expanded at a 0.20% pace after contracting -0.20% previously. On a quarterly basis however, the median forecasts are very bearish with Canadian GDP forecasted to contract at a steeper pace of -1.00%, down from -0.60% previously. Traders will be closely watching Canadian GDP data as the Bank of Canada meets later this month in what could potentially swing sentiment towards more rate cuts from the BoC. A negative quarterly GDP print could push the Canadian economy closer towards recession. USDCAD has been trading near the highs of 1.3310 in the past few days and a weaker GDP print could potentially push USDCAD to higher ground. Immediate support comes in at 1.3045 followed by a main technical support at 1.2780.

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Apple Readying the iPhone 6s Launch

Apple stock took a beating last month as the stock price briefly fell below the $100 psychological level to test the lows of $92 per share before stabilizing. September marks a new month for Apple as the company looks set to announce its newest version of the iPhone. The iPhone 6s could potentially bring back the buzz to the company. Although there has been no official confirmation as of yet, the Internet is abuzz with the usual rumors and phone specification leaks. Some of Apple’s manufacturing partners are starting to ship components, which has undoubtedly led to speculation of a new iPhone hitting the markets. Shares in Apple have been trading sideways for most of this year and prices started to decline from the highs of $133.35 after the most recent quarterly earnings report which saw a rather dovish forward guidance from Apple. Shares in Apple closed at $112.70 yesterday with the potential of more upside in store, riding on speculation.

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