Equities Under Pressure

Daily Analysis - 24/09/2015

US Equity Benchmarks Remain in the Red for the Week

There was no let up in pressure on equity markets which continue to underperform while the US Dollar makes up for lost ground, posting broad gains across the board. US durable goods orders and weekly unemployment claims are the main events to watch later in the session.

Japan Manufacturing Falls

The Japan flash manufacturing PMI released earlier today by Markit came in at 50.9, down from 51.7 in August, falling below the median estimates of 51.3. The data showed Japan's production being little changed while the manufacturing sector pointed to a broad slowdown as new orders growth declined after rising sharply in August at the fastest pace this year. The decline in the sales volumes was attributed to the slowdown from China where a decrease in the exports was expected. The Yen, which weakened yesterday, losing -0.13% versus the US Dollar was seen gaining in today's early trading session with USDJPY down -0.20% after the release. Price action in USDJPY remains range bound for the past 10 trading sessions and could potentially signal a breakout in the near-term should conditions change drastically.

ECB Needs More Time

ECB President Mario Draghi testified before the European Parliamentary Economic and Monetary Commission yesterday and noted that while he acknowledged the potential for extending and expanding the Central Bank's bond purchase program, he warned against making premature decisions. Draghi was quoted as saying that the ECB would adjust the size, composition and duration of asset purchases when it feels appropriate. The rather neutral tone of Draghi's comments managed to offer some hope for the Euro, which was trading mostly flat for the day before EURUSD managed to close above the 1.1135 support level. The recovery rally in EURUSD has seen the currency pair close yesterday with gains of 0.59%. Yesterday’s Eurozone PMI data also managed to match the median estimates offering some support for the common currency. The next major resistance level on the upside sits at 1.1252 region while to the downside the 1.1100 support level remains open.

Crude Falls After Inventory Decline

The weekly crude oil inventories report from the Energy Information Administration showed a greater-than-anticipated fall in the US commercial crude oil stockpiles. For the week ending September 18th, inventories fell by -1.925 million barrels, down from a -2.104 million barrel decline recorded a week earlier. The median estimates only expected to see a drawdown of -1.650 million barrels. Earlier the American Petroleum Institute showed a weekly inventory storage decline of 2.700 million barrels, posting a second consecutive weekly decline while the US oil rig count continued to fall for the third week in a row. Despite the news which was expected to be positive for crude oil, WTI crude oil futures for November delivery declined sharply yesterday, losing over -4.15% for the day to settle at $44.61 a barrel.

US Durable Goods

The monthly US durable goods orders are due for release at 13:30 GMT today. The median estimates point to a 0.10% rise for core durable goods orders which excludes transport and a decline of -2.3% on the headline durable goods orders figure. A few hours later, new home sales data is also due with the forecasts pointing to a decelerating pace of growth estimated at 1.60%, down from 5.40% a month ago. The US Dollar has managed to gain strength since the brief dip on a dovish FOMC last week and has been trading higher across the board. A better than expected beat of estimates for today’s upcoming macroeconomic releases could further reinforce the bullish stance in the near term. USDCHF has edged higher for the past 4 days with the rally touching highs near 0.9800. Prices nevertheless have been struggling near this level, failing to break higher in the past three attempts.