The Fragile Recovery Continues, PMIs In Focus

The Fragile Recovery Continues, PMIs In Focus

City Index  | Sep 23, 2020 08:16

European markets opened higher as they continue the recovery from Monday’s sharp sell off. The risk tone in the market is showing some signs of improving, although pressure remains.

Stocks on the FTSE have reacted surprisingly well to Boris Johnson increased restrictions to stem the spread of coronavirus. The UK index closed yesterday on the front foot and is trading higher out of the blocks on Wednesday. The measures weren’t as drastic as some had feared which has offered some support to stock, particularly in the retail and hospitality sector.

Attention will now turn to September’s preliminary PMI readings for both the service and manufacturing sectors, for further clues over the health of the economic recovery in the UK. Expectations are for both sectors to show a slight slowing in expansion this month after solid performances in August.

The manufacturing PMI is forecast to dip to 54.3 in September, down from 55.2 in August. Meanwhile, the service sector is expected to tick lower to 56, down from 58.8. The level 50 separates expansion from contraction. A strong reading could help cement the so far fragile recovery in stocks. However, signs of weakness could damage an already vulnerable recovery.

Dollar hits 2 month high

The US Dollar is trading at 2 month highs, following surprisingly optimistic comments from Fed policy makers overnight. Fed Chair Jerome Powell said that the US economy stood resilient throughout the coronavir7is crisis whilst Fed official Charles Evans said that the US economy had returned to 90% of pre-pandemic levels, adding that the Fed could raise interest rates before the 2% average inflation target is reached.

USD drags on gold

The stronger US Dollar is pilling pressure on gold. The precious metal is trading lower for the third straight session, as it homes in on the weekly low of $1882. The next move for the precious metal depends largely on the PMI readings and how they impact the risk tone in the market.

Oil under pressure ahead of EIA data

Oil is also trading on the back foot, paring gains from the previous session. Both oil contracts experienced a 4% sell off at the start of the week. With coronavirus cases rising, particularly sharply in Europe and increasing restrictions in the UK the demand outlook for oil is souring; and it is doing so just as more supply is set to come into the market from Libya. Crude inventories rise by 691,000 barrels in the week ending 18th September, compared to a drop of 2.3 million forecast by analysts. EIA data is due later today and could take on greater importance than usual. Should we see another surprise jump in inventories this could be enough to spark another leg lower for crude.

FTSE ChartFTSE Chart

"Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient.

Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions."

Original Post

City Index

Related Articles

Latest comments

Add a Comment
Please wait a minute before you try to comment again.
Discussion
Write a reply...
Please wait a minute before you try to comment again.

Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

English (USA) English (India) English (Canada) English (Australia) English (South Africa) English (Philippines) English (Nigeria) Deutsch Español (España) Español (México) Français Italiano Nederlands Português (Portugal) Polski Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 简体中文 繁體中文 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
Sign out
Are you sure you want to sign out?
NoYes
CancelYes
Saving Changes

+

Download the Investing.com App

Get free real time quotes, charts and alerts on stocks, indices, currencies, commodities and bonds. Get free top of the line technical analysis/predictors.

Investing.com is better on the App!

More content, faster quotes and charts, and a smoother experience is available only on the App.

';