Market Update: Wednesday, September 5, 2018

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Daily Insights

  • Rand drops to record low. South Africa’s currency (the rand) weakened to a record low vs. the U.S. dollar after data released September 4 showed its economy fell into a recession last quarter. South Africa’s economic woes and the rand’s historic slide renewed fears of global contagion from emerging markets’ currency turmoil this year. Chinese stocks dropped the most in three weeks, while S&P 500 Index futures and European stocks were slightly lower.

  • Rand turmoil weighs on EMD. August was a difficult month for emerging market debt (EMD), and the currency headwinds are piling up with the rand’s latest slide. On today’s LPL Research blog post, due out later today, we examine the current state of EMD (given recent developments) and its implications for global credit markets.

  • ISM rises to 14-year high. The Institute for Supply Management’s (ISM) manufacturing survey jumped to 61.3 in August, its highest point since May 2004 and above consensus estimates of 57.6. ISM’s New Orders gauge jumped 8.1% for the strongest monthly growth since August 2014, though its measure of new exports orders was slightly down in August, indicating the strong rise in new orders was driven by domestic demand. We also continue to see mixed signals from the manufacturing data that either point to strong demand or supply chain disruptions, rising inventories, and slowing supplier deliveries. However, the price index remains very elevated, and the most recent ISM report is a strong sign that the impact of fiscal stimulus continues to outweigh trade concerns for now.

  • Trade balance widens. Data today showed the U.S. trade deficit in July widened by $4.3 billion, the most since March 2015, to $50.1 billion. The U.S. trade deficit has widened for two straight months after $50 billion in tariffs on Chinese imports were implemented in early July. The widening deficit is further evidence of tariffs’ economic drag after a boost in exports last quarter fueled strong growth in economic output as firms front-loaded shipments ahead of the tariffs’ implementation.

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Click Here for our detailed Weekly Economic Calendar

Wednesday

  • MBA Mortgage Applications (Aug)
  • Trade Balance (Jul)

Thursday

  • ADP Employment Report (Aug)
  • Initial Jobless Claims (Sep 1)
  • ISM Non-Manufacturing Index (Aug)
  • Factory Orders (Jul)
  • Durable Goods Orders (Jul)
  • China Foreign Reserves (Aug)

Friday

  • Nonfarm Payrolls Report (Aug)
  • Unemlpoyment Rate (Aug)
  • Eurozone GDP Report (Q2)
  • China Trade Report (Aug)


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