ISM beat boosts USD; Stocks dip from ATHs

Summary:

• USD gains after ISM beats forecasts

• Wall St. pulls back from record high

• Uber tumbles after earnings update

• UK service sector PMI bounces

A stronger than expected data point for the US service sector has provided a further boost to the buck which was already trading higher on the day and has appreciated further since the release. 

• ISM non-manufacturing PMI: 54.7 vs 53.5 exp. 52.6 prior

• Prices paid 56.6 vs 60.0 prior

• New orders: 55.6 vs 53.7 prior 

• Employment: 53.7 vs 50.4 prior

This is a solid set of figures all round and comfortably better than expected with not only the headline improving more than expected but also the new orders and employment components rising from the September reading. Last Friday saw the ISM manufacturing PMI come in at 48.3, slightly below the 49.0 expected and the 3rd consecutive sub 50 reading for this metric. This afternoon has seen several big figures breached for USD pairs with EURUSD dipping back below 1.11 and the USDJPY moving back above the 109 handle. 

The data also caused a clear reaction in the precious metals complex with sizable declines seen in Gold and Silver of 1.7% and 2.5% respectively. The fall in Gold has seen the market tumble back below the $1500/oz mark and the combination of improved risk appetite, rising US yields and a strong buck are all exerting downward pressure. 

US stocks have dipped a little this afternoon after beginning close to their all-time highs for the 3 major indices. It is worth pointing out that these declines don’t yet appear to be anything other than a dip in the prevailing uptrend and the falls are less than 0.5% on the day. Trade continues to dominate the headlines with reports that the Trump administration are considering removing tariffs on $112B worth of Chinese imports providing a further boost overnight.

It’s been a bumpy ride for Uber investors this afternoon after the firm announced its latest results after the closing bell last night. The results were as follows:

• Loss per share: $0.68 vs $0.81 expected

• Revenue; $3.81B vs $3.69B expected

Despite beating on both the top and bottom lines here with a smaller than forecast loss and higher turnover the stock opened lower by more than 8% this afternoon. The losses keep piling up for the firm with a net loss of $1.16B for the quarter topping the $986m seen for the same period last years as eye watering figures on this front become the norm. Speaking on CNBC, CEO Dara Khosrowshahi stated that the company is aiming for profitability on an adjusted EBITDA basis by 2021 but after an expected loss of $2.8-2.9B forecast for this year that does seem wishful. Another thing to watch for the stock this week is the expiration of a lock-up period tomorrow which will allow longer-term investors to cash out of their stock. The current price represents a loss in excess of 35% from the IPO level. 

A leading industry survey has shown a better than expected view for the UK service sector, with the PMI print for October coming in at 50.0 compared to a consensus forecast of 49.6 and a prior reading of 49.5. The release means that we have, by the skin of our teeth, avoided the first consecutive readings in contraction territory since the summer of 2016 when these surveys took a hit from the shock outcome of the Brexit referendum. The manufacturing equivalent also came in better than forecast last Friday and despite the readings remaining at levels that are far from stellar, they represent a welcomed improvement nonetheless.