European Markets
European markets are trading mixed today as investors continue to brace for an action-packed week. Yesterday’s session was dull for most European markets as the biggest market in the world, the US, was closed for a bank holiday, and also there was no important economic data due. However, today we have our first important economic number due for the US economy, and investors will be dissecting that number from every angle.
Asian Markets
Over In Asia, the trading session was mostly negative, as most traders and investors paid attention to the latest economic numbers, many of which actually produced numbers that were better than expected. For instance, we saw another dramatic drop in South Korea’s headline inflation number, which dropped to 2% from its previous reading of 2.6%. However, the KOPSI index didn’t see much of an enthusiasm from investors as the index remained in the negative territory.
The Hang Seng Index, the Shanghai stock index, and the Japanese Nikkei all closed very much in the negative territory with losses of -0.39%, -0.39%, and -0.04%, respectively.
US Futures
US futures indicate that things are looking a bit more optimistic there as traders continue to show their optimism about the Fed’s next policy move. There's no doubt that traders and investors have been waiting for this moment for a very long time, but their preference has been that the Fed should have done a while back what they are going to do this month—begin the process of cutting the interest rate.
Speculators continue to believe that the risk of the US economy falling into recession is still very much on the table, and in this context, every single economic reading is highly important for them. For example, today's US ISM Manufacturing PMI number is going to be highly important for traders and investors because they will continue to look at things from the contraction territory. The forecast for today's number is 47.5; any number below the reading of 50 confirms that the sector is not in the expansion territory but in the contraction territory—and this very much lines up with the narrative that the US economy is actually open to threats of another recession taking place. On the positive side, we anticipate a slightly improved number compared to the previous 46.8.
Now, if the actual number matches the expectations or comes slightly better than the expectations, it will not rock the boat for many, as many would think that we are only meeting expectations and there is nothing to be excited about as the headline number still confirms contraction. The fireworks will occur if the number falls short of the forecast or if it exceeds the desired level, specifically a reading of 50 or above.
Gold
Gold prices continue to trade in a downward direction, while high-frequency traders are waiting for a moment for real price action to kick in. Today, the US ISM number may actually bring that opportunity for many traders. The 2,500 price level is important for traders because it marks the boundary (very much so) between bulls and bears. If today's number fails to impress the market, we are likely to witness significant market action to the upside, as traders may perceive this as another policy mistake by the Fed.
Simultaneously, there may be an increase in chatter for the Fed to act more aggressively and cut the interest rate. However, if the number matches the expectations, then we are likely to see less of a reaction among gold traders. High frequency traders would be the one which are more than likely to be highly active and their primary objective would be to make sure their trading is happening at prices which are in the market while execution an stability is optimal and for this it is very natural for them to consider trading VPS.
On the date of publication, Naeem Aslam did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.