New York Session Today's Market Update

The NY session was busy with a slew of economic data released. The data for the most part came in mixed for the U.S. and disappointed in Canada. Canada’s Q2 annualized GDP came in weaker than the anticipated +2.5% at +2.0% (prior +5.8% revised lower from +6.1%). This supports the view that the Bank of Canada is likely to pause on interest rates at its September 8 meeting and saw the Loonie weaken as USD/CAD rallied to around 1.0675 before running into a significant technical resistance level. Declining oil prices also weighed on the Canadian dollar as oil slid by roughly -3.86% on a weakening growth outlook.

The U.S. data flow was heavy but did not deliver much direction for the markets as investors remain focused on this week’s employment data. June S&P/Case-Schiller 20-City Composite declined to 4.23% from the prior 4.64% however the number beat the 3.50% expectations. August Chicago PMI was mostly in line with the expected 57.0 with a print of 56.7 and prior 62.3. It was the positive surprise for the August Conference Board consumer confidence reading that gave a short term boost to risk sentiment. The survey results returned a figure of 53.5 much better than the anticipated 50.7 (prior 51.0 revised higher from 50.4). FOMC minutes from the August 10 meeting came as no surprise and merely reiterated what investors heard from Fed Chairman Bernanke’s Jackson Hole speech this past Friday. The Fed noted that risks to recovery were larger, the labor market was weaker than anticipated, and inflation is likely to remain ‘subdued’. They also noted that reinvesting in MBS might be ‘desirable’. While this does not indicate that the Fed will increase the size of its balance sheet with additional purchases, we know that the size of the Fed’s balance sheet is not likely to shrink anytime soon and may remain the same. The key takeaways are that inflation is likely to remain low and that Fed’s holdings will remain at elevated levels which keep pressure on Treasury yields.

U.S. 10-yr Treasury yields dropped to around 2.47% on the dovish FOMC minutes. While U.S. equities mostly drifted sideways throughout the session, a slightly more volatile afternoon led to stock markets closing marginally higher. The DJIA ended the day up by about +0.4% and the S&P gained around +0.03%. Precious metals rose with gold gaining by about +0.87% and silver advancing by roughly +1.76%.

On deck for the Asia/Pacific session is Australian AiG Performance of manufacturing index for August and 2Q GDP. China releases its August HSBC manufacturing PMI, Japan will see August vehicle sales and New Zealand is set to release August ANZ commodity prices.