Weak Data And Drop In Commodity Market Clap Back On Global Markets Boost

It was all going rather well

The global market was on a rise and we were all optimistic. It was a much needed change from the scary downward (and sometimes just flat) trends being observed and an upward move was long overdue.

The commodity markets took the lead here recently causing the Asia markets to rise for two weeks straight in anticipation of the biggest and most generous trade deal across the Pacific in about 50 years. About twelve countries in the Pacific Rim including the US, Japan, Canada and Australia were part of this unprecedented trade pact and it was expected to give a boost to global markets.

Then it all went bust

There was an unexpected fall in industrial orders from Germany when China and other non-European countries weakened in their demand. So instead of the anticipated 0.5% increase in orders for German commodities, it fell by 1.8% in just one month. Note that this was before news about emissions test scandals surrounding Volkswagen (DE:VOWG) emerged; it would have been much worse if it had.

So the German GDAXI went down by 0.1% along with the London FTSE. France’s CAC 40 was flat and, thankfully, the euro and the sterling pound were more stable within this upset. Further, the MSCI All World Index that monitors all global stocks showed a 0.2% rise.

But there was more to come. Oil prices dropped back down after Brent Crude had shown its first increase in two weeks to $50 per barrel. Copper also fell along with several industrial metals following a good three weeks.

The dollar DXY then dipped by 0.69% following fears that the Federal Reserve would continue to wait out a rise in interest rates within the U.S., at least for this year. This was reinforced by data from the Commercial Department showing that U.S. trade deficit was having its largest expansion in five months. A poor U.S. jobs report also reflected this anticipation. Regardless of these poor showings, it is predicted that the Federal Reserve will not raise interest rates causing questions about if, how and when the U.S. debt situation will be addressed.

As if all that wasn’t bad enough, the dollar was down 0.2% against the yen JPY at 120.21, while the euro was up against the dollar at €1.1274 for every USD. The global slowdown also had an effect on U.S. treasuries prices, which gained on the increased in trade deficit. 10 year treasuries notes US10YT (which are the benchmark) rose in price by 6/32 to give 2.0350%.

But not for everyone

Australia, for instance, was one of the best performing major currency within all this turbulence. The Australian dollar held firm, supported by a confident and (characteristically?) relaxed central bank that there is nothing to panic about.

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Asia was also happy with the MSCI’s Asia-Pacific index outside Japan climbing by 0.6% to get to its highest point in over a month. The Nikkei 225 extended its rebound following a bad eight months to be at 1% following rumors of more support for its stimulus program.

The storm may have passed, but U.S. lawmakers could face heavy backlash if they approved this Trans-Atlantic trade pact.

Written By: Evans Walsh