The calm before the storm?

We are getting a lot of these déjà vu feelings lately. It had been another day dominated by US data, USD movements and earnings while oil prices slipped.

US Traders
Source: Bloomberg

Mixed signals came from the set of manufacturing data overnight. While September’s manufacturing production reversed the decline in August and came in at 0.2% MoM, beating consensus, capacity utilization slipped to 75.4%, below the market expectation by 0.2%. Overall industrial production was seen up 0.1% MoM.

This was a positive trend for the US economy which sees approximately one-eighth of total GDP from the manufacturing sector.

What probably caught the market’s attention was the latest October Empire State index which came in at -6.8, the lowest figure recorded since May while the market had been expecting a reversal into expansionary territory.

The dollar index was kept under pressure in the New York session and failed to see a firm break above 98.000 level once again. JPY had been the biggest gainer amongst Asian currencies with USD/JPY selling off to trade at sub-104.00 into Asia morning. This could help to take some of the selling pressure off Asian currencies today, though we will not be surprised if the dollar resumes its upward trend in no time.

Federal Reserve Vice Chairman Stanley Fischer took to the mike on Monday, contrasting Fed Chair Janet Yellen’s comments with hawkish talks. Nevertheless, Fischer’s stance is not a surprise and meant little impact for markets since taking the side from a neutral stance.

Stock markets meanwhile remained weighed on Monday from weaker oil prices, but is seeing more of a drift than sharp movements. S&P 500 index closed with 0.30% decline at the start of the week. The positive earnings report from the highly anticipated Bank of America did little to buoy the index.

Netflix and IBM, which came in after hours have yet to be priced in for the markets but could provide some lift. Overall, earnings have broadly surpassed expectations thus far, though it remains in an early stage of release.

Meanwhile the local currency saw a sustained hit since Friday’s Q3 GDP (advance estimate) release. USD/SGD printed a fresh 7-month high of 1.3930 and continued to be supported around 1.3900 levels into Tuesday. Gloomy sentiment from a growth slowdown coupled with the buildup of Fed hike expectation continue to take a hit on the Singapore dollar.

The STI also sustained in near neutral trade as investors took to the sidelines ahead of several key events in the week. The onslaught of key events from China’s Q3 GDP, the third US Presidential debate and ECB’s meeting will set in from Wednesday. Although the events and indicators are largely expected to go according to expectations, jitters are not something we are unfamiliar with given the slew of surprises we have seen of late.

Yesterday: S&P 500 -0.30%; DJIA -0.29%; DAX -0.73%; FTSE -0.94%

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