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By: Andria Pichidi
US equity futures are improving, supported by a number of positive developments. Most prominently, President Trump is doing better and could be discharged as soon as today. News that the President had contracted COVID weighed on Wall Street Friday. However, the WSJ reports (paywall) that this “doctors offered conflicting signals about how he is faring” with the illness. There are fresh hopes for a stimulus deal in Washington. Optimism for a Brexit solution is on the rise as well after UK PM Johnson talked to EU Commission President Von der Leyen on Saturday and both sides agreed to extend talks ahead of the October 15 EU summit.
The USA30 has firmed 0.6%, the USA500 is up 0.7% and the USA100 has climbed 0.8% in pre-market futures trading and currently unaffected by the so far US PMI data. In general, however, Wall Street remains sideways since Friday’s close. The US Dollar was also unmoved following the Markit services PMI, which came in at an unchanged 54.6 in September. EURUSD remains near session highs, trading over 1.1780, while USDJPY idles under 105.60.
US Markit services PMI held at 54.6 in the final September, unrevised from the flash reading, and is down fractionally from the 55.0 in August (the best since March 2019). This is a third straight month in expansion, however, with the 50.0 reading in July. The index has rebounded from the 26.7 record low from April. It was at 50.9 last September. The composite index was bumped down marginally to 54.3 from the 54.4 September flash, and it’s off from the 54.6 in August. However, it too has been in expansion for three straight months. It was at 51.0 a year ago, and at a record nadir of 27.0 in April.
The focus is really on tomorrow’s RBA meeting and Fed’s Powell speech. Chair Powell will speak on the economic outlook at the annual NABE conference. Also, the FOMC minutes from the September 15, 16 meetings are on tap on Wednesday. Remember this meeting included the quarterly SEP and included the Framework provisions. The minutes will be scrutinized for information more insight on the shift to an average inflation target and whether there’s any specificity the policy that rates will remain accommodative until inflation has “risen to 2% and is on track to moderately exceed 2 percent for some time.” Other Fed speakers this week include Evans, Bostick, Harker, Kaplan, Rosengren, Kashkari, and Williams.
Australia’s docket is headlined by the RBA’s meeting tomorrow morning, expected to result in no change in the current 0.25% rate setting. Increasing speculation that the bank will need to cut in the near term has introduced the possibility that they will cut to 0.10% this week. However, the government is projected to unveil new stimulus spending as part of the budget, seen as part of a coordinated push to support the economy. The central bank will likely want to see the details of the budget before pulling the trigger on another rate cut. The RBA’s Financial Stability report will be released Friday. Economic data has the August trade report and August housing investment in both places tomorrow as well.
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