Daily Comment – Wall Street tumbles amid September blues
Yen and franc gain, aussie the main loser
Wall Street tumbles on risk-off September start
ISM mfg. PMI rekindles economic concerns
Oil collapses on prospect of Libyan accord
![](https://www.xm.com/wp-content/uploads/2024/09/Perf_Sep4-1.png)
Risk aversion prevails
The US dollar outperformed most of its major counterparts on Tuesday, losing ground only versus the traditional safe havens such as the yen and the franc. The biggest loser was the commodity-linked aussie.
The strengthening of the safe havens and the weakening of the risk-linked currencies suggests that risk appetite has deteriorated, and this is evident by the slide in Treasury yields despite the US dollar marching north, but mostly by the tumble in stocks. Wall Street indices recorded their biggest daily percentage decline since early August, with the tech-heavy Nasdaq falling more than 3%.
There was no clear catalyst to begin with, but the ISM manufacturing PMI may have intensified risk aversion. That said, the PMI results on their own do not justify a market response of that magnitude. Perhaps investors turned cautious just on the knowledge that September is the only calendar month to average a negative return over the past 98 years. In other words, it may have been a self-fulfilling prophecy.
It may have been a self-fulfilling prophecy
Nonetheless, history also says that stocks tend to perform better in Septembers leading up to presidential elections. Thus, it will be interesting to see whether a recovery could be on the cards later in the month.
ISM mfg. PMI revives concerns ahead of NFP report
As for the ISM manufacturing PMI, the headline figure rose somewhat, but not as much as expected, with the details of the report painting a mixed picture. Prices paid rose, but the closely watched new orders subindex dipped further into contractionary territory. The employment index inched up, but not enough to climb above 50.
The release may have revived some concerns with regards to the performance of the US economy and that’s why the probability of a 50bps rate cut at the upcoming Fed meeting rose to 43% from 30% at the beginning of the day.
The release may have revived some concerns with regards to the performance of the US economy
Moving ahead, given Powell’s emphasis on the labor market, whether the Fed will indeed begin its easing cycle with a bold move may largely depend on the outcome of Friday’s employment report, where some improvement is expected. However, the failure of the ISM manufacturing employment index to return to growth suggests that there may be some downside risks.
Oil collapses, BoC to cut for a third time in a row
In the energy world, oil prices collapsed yesterday, falling more than 5% on signs of an accord for ending the dispute that curtailed exports and production in Libya. Legislative bodies have agreed to appoint a new central bank governor within a month, raising hopes that production will return to its pre-dispute levels soon.
News that some OPEC+ members are scheduled to increase output by 180k bpd in October may have also weighed on prices. This suggests that now, the only variable that could support oil prices are the Middle East tensions, but they are well overshadowed at the moment.
The oil-linked loonie also slid, with traders today eagerly awaiting the BoC decision. Investors see a third consecutive rate cut as being a done deal, assigning a 75% chance to a 25bps reduction and 25% to 50bps.
Data after the previous meeting pointed to a slowing economy and cooling inflation, justifying a third rate cut in a row. Thus, it is not a question of whether officials will reduce interest rates, but by how much. A 50bps cut could disappoint those expecting a smaller one, thereby pushing the Canadian currency lower.
It is not a question of whether officials will reduce interest rates, but by how much
![](https://www.xm.com/wp-content/uploads/2024/09/Calendar_Sep4-1-1.png)
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.