- Gold and silver are rising by 1% and 1.5%, respectively, amid a slight weakening of the U.S. dollar, while Bitcoin has recovered part of its losses and moved back above $77,000. Oil has erased its earlier decline and is trading back above $95 per barrel, although equities appear relatively resilient, with VIX futures down nearly 3.5%.
- U.S. labor-market data released today came in below expectations. ADP employment increased by 38,000 jobs versus 47,000 expected and 44,000 previously. Durable goods orders were unchanged in the latest reading, showing growth of 0.4% m/m and 1.1% y/y, while factory orders rose by 0.9% m/m versus the 0.7% market consensus and a 0.3% decline in the previous month.
- The Bank of Canada left interest rates unchanged, in line with market expectations. Governor Tiff Macklem warned about growing upside risks to inflation, citing, among other factors, tensions in the Middle East. He also noted that new tariffs and an escalation in trade conflicts would raise costs for both businesses and consumers.
- These factors are weighing on confidence in the durability of the economic recovery, even though the economy and inflation are broadly evolving in line with the BoC’s July projections. Canadian two-year bond yields reached their session high after the Bank of Canada highlighted increased upside inflation risks. The comments carried a slightly more hawkish tone, which may be supporting the Canadian dollar.
- The U.S. dollar index (USDIDX) is edging lower, while EURUSD is trading broadly flat shortly before the release of the Fed’s Beige Book, which provides an assessment of economic conditions across key U.S. regions. The Atlanta Fed’s GDPNow model estimates U.S. economic growth at 4.8% in the third quarter, supporting a relatively positive outlook for the economy.
- Goldman Sachs said it favors equities over the next 12 months, expecting solid earnings growth, a resilient economy and low recession risk in the U.S. to continue supporting stocks despite the late stage of the cycle. At the same time, the bank warned that high bond yields, fiscal concerns and sticky inflation could limit upside potential, and suggested diversification through low-volatility stocks, dividend-paying companies, gold and real assets.
- Impax Asset Management believes the September Fed decision is now effectively a “coin flip,” with markets close to evenly split between a rate hike and no change. The firm also expects volatility in the U.S. Treasury market to increase around upcoming inflation and payrolls data. At the same time, Impax argues that the U.S. Treasury could adopt larger and more frequent buybacks of long-dated government debt.
- U.S. Treasury Secretary Scott Bessent said the goal of Treasury buybacks is to remove illiquid, long-dated bonds from the market, restore more balanced pricing and free up bank balance sheets; he also added that he knows what the Japanese authorities are planning in this area. Bessent believes China remains just behind the U.S. in the AI race, while the United States is on the verge of another major acceleration. At the same time, he accused China of “financial repression” of domestic savers and of subsidizing production, pointing to price advantages in sectors such as autos.
- UBS analysts expect China to be unlikely to advance its semiconductor manufacturing capabilities fast enough to develop a viable alternative to cutting-edge lithography technology such as ASML’s within the next decade.
- Venezuela has signed new agreements to expand its oil sector with Eni, Chevron and Primavera. The Chevron deal includes a new oil contract, a signing bonus for a project in the Orinoco Belt and a restructuring of existing oil agreements. Eni and Primavera are also expected to participate in new projects aimed at increasing production and developing Venezuela’s oil infrastructure.
USDIDX chart (D1 interval)
The U.S. Dollar Index contract pulled back to 99.5 today, offering some temporary relief to the equity market. The question is whether the rebound in oil prices could eventually translate into renewed strength in the dollar index above the “neutral” 100 level, signaling an appreciation of the U.S. currency against a basket of major currencies: the euro, Japanese yen, British pound, Canadian dollar, Swiss franc and Swedish krona.
Source: xStation5
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