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Poor economic data triggered significant selloffs in US stocks last Friday, leading to steep losses in the major indices. The Dow and S&P 500 both lost around 1.7% while the tech-heavy Nasdaq fell 2.2%. Not the greatest of days. Not the greatest of weeks. A glance at the futures markets this morning does paint a more optimistic picture, with the big three currently up around 0.4%. The Dollar remained relatively isolated from all the drama, with the DXY making a slight gain on the day. Gold was similarly unmoved, losing no more than a handful of Dollars on Friday. Crude oil prices on the other hand fell over 3% late last week as tensions in the Middle East continued to dissipate.
The latest S&P global PMI report stoked fears that US business activity is stalling. While the manufacturing sector remained firmly in expansion and even exceeded expectations, the US service sector on the other hand unexpectedly fell into contraction with a 49.7 print – the lowest in over two years.
Fundamentals may have to take a step back for the time being. The German election has just concluded and as usual the event provided no clear winner. The leading parties will now have to wrangle out a coalition for the years ahead. The Euro rose 0.5% against the Dollar this morning and is currently hovering around $1.05.
The economic calendar is utterly devoid of content early this week, so expect politics to be the main driver behind any market movements. The drought won’t really end until Friday, with the release of the PCE price index. The core index, which excludes food and energy costs, has long been the Fed’s main weather vane to gauge US inflation. US GDP may also provide a surprise on Thursday, but until then, better to keep an eye on the news.
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