The return of U.S. and Canadian traders after the Labor Day holiday injected fresh volatility into the financial markets.
Curious about how the major asset classes performed?
Explore the latest economic updates and market headlines that influenced price movements:
Headlines:
- Australia's current account deficit widened significantly from 6.3 billion AUD to 10.7 billion AUD, far exceeding the expected 4.5 billion AUD shortfall.
- Swiss CPI remained flat in August, missing the estimated 0.1% month-over-month increase, following a 0.2% decline in the previous period.
- The Swiss economy grew by 0.7% quarter-over-quarter in Q2 2024, surpassing the anticipated 0.5% growth, matching the previous quarter's expansion.
- Canada's manufacturing PMI rose from 47.8 to 49.5 in August, indicating stronger industry growth.
- The U.S. ISM manufacturing PMI for August came in at 47.2, slightly below the 47.5 consensus but up from the previous 46.8, with the prices component increasing from 52.9 to 54.0.
- U.S. construction spending decreased by 0.3% month-over-month in August, missing the expected 0.1% increase, after a flat reading in the previous month.
- The U.S. RCM/TIPP Economic Optimism Index improved from 44.5 to 46.1 in August, slightly below the 46.2 consensus.
- New Zealand's Global Dairy Trade (GDT) auction saw a 0.4% decline in dairy prices, following a 5.5% gain in the previous auction.
Market Movements:
The day began on a calm note, with crude oil trading in positive territory and Treasury yields trending slightly lower. However, the energy commodity's gains were short-lived, as it turned lower during the London session. Concerns over weak demand from China and increased output from OPEC+ weighed heavily on oil prices. The selloff intensified as U.S. markets opened with a risk-off sentiment, leading to sharp declines in equities and bitcoin.
U.S. bond yields briefly steadied following a slightly better-than-expected August ISM manufacturing PMI report. Traders appeared to focus on the increases in the prices and employment components, as markets began adjusting expectations ahead of Friday’s NFP release.
Despite this, equity indices continued their downward trajectory. The S&P 500 dropped more than 2%, while the Nasdaq suffered a 3.1% loss, driven by another round of selling in the tech sector. Nvidia shares plummeted 9.5%, with other chipmakers like Broadcom and Micron also seeing significant declines.
FX Market Behavior: U.S. Dollar vs. Majors
Forex market volatility kicked off early in the Asian session, with Australia's weaker-than-expected current account balance putting pressure on both the Aussie and Kiwi, as risk-off sentiment reemerged.
USD/JPY extended its decline, briefly stabilizing during the London session before resuming its downward trend ahead of the U.S. ISM manufacturing PMI release. The slightly better-than-expected report managed to halt the pair's losses, as it eased some concerns about a potential U.S. recession.
USD/CHF also dipped on risk aversion but saw a slight uptick when Swiss CPI came in flat, missing expectations of a 0.1% increase. The dollar's strength proved dominant across the board, capitalizing on safe-haven flows and outperforming other major currencies.
Upcoming Economic Calendar Highlights to Watch
- Australian GDP: 1:30 AM GMT
- Chinese Caixin Services PMI: 1:45 PM GMT
- Eurozone PPI: 9:00 AM GMT
- Bank of Canada (BOC) Monetary Policy Statement: 1:45 PM GMT
- U.S. JOLTS Job Openings: 2:00 PM GMT
- BOC Press Conference: 2:30 PM GMT
- U.S. Beige Book: 6:00 PM GMT
All attention may be on the Loonie today, with the Bank of Canada set to announce its monetary policy decision. A 0.25% cut in borrowing costs is anticipated. For a detailed preview of the September BOC decision, consult our Event Guide.
Additionally, keep an eye on the U.S. JOLTS job openings report, as it serves as a key leading indicator for the highly anticipated Non-Farm Payrolls (NFP) report coming out on Friday.
