Risk-off returns with Stocks and Oil moving lower

Summary:

• US100 drops back below breakout level despite ISM beat

• Stock of the week: Twitter

• Oil also looks through some supportive data to fall lower

• Rate hike in Sweden becomes a toss-up; Swedish election in the spotlight

• ADP misses to drop near 1-year low; USD pulls back

• EURUSD awaits key NFP report

There’s been a distinct risk-off them to the day’s trade with stock indices tumbling lower. The US100 is one of the worst hit as the tech sell-off which began yesterday gathers momentum and price has fallen back below its prior breakout level of 7484. A daily close below here could be seen to render the breakout a couple weeks back as false and may pave the way for further declines. Some strong ISM non-manufacturing data did little to help the benchmarks plight, despite rising more than expected to 58.5 from 55.7 prior.  

Our stock of the week this time out is Twitter (TWTR.US), one of the tech companies associated with social media platforms that has drawn increased attention as of late. Twitter executives were questioned by the US lawmakers over an alleged political discrimination on their platforms as well as foreign meddling into US elections. In the report we provide details of what the case is about as well as take a look at the latest financial report of the company.

The price of crude is tumbling this afternoon despite a larger than forecast drop in the weekly DOE inventory figure - similar to how strong uS data has failed to support stocks. A headline print of -4.3M was lower than both the consensus forecast for a reading of -2.2M and also lower than last night’s API which showed a decline of 1.2M. It is now 3 consecutive weeks of declines for this gauge of oil stockpiles and this has resulted in the overall level of US crude stock dropping to its lowest level since February 2015. Price tumbled around 130 ticks in the minutes since the release with price falling from a high of around 77.57 to 76.30.

The Swedish krona has extended losses across the board after the Riksbank pushed back the date when it could embark on the monetary tightening. The main interest rates was obviously kept unchanged at -0.5% extending the period with negative borrowing costs. On top of that, the bank did not decide to alter its macroeconomic forecasts in a significant manner leaving its estimates broadly unchanged. The SEK is trading 0.3% lower both against the euro and dollar.

A weaker than forecast private jobs figure from the US may have lowered expectations for Friday’s NFP report while pushing the USD to its lowest point of the day. The ADP employment change for August fell to 163k - well below the 195k expected and the 217k seen last time out (this itself was revised marginally lower from 219k). You have to go back to September 2017 to find a worse reading for this employment indicator and this was largely due to the impact of hurricanes Harvey and Maria which created a short term loss of jobs in the areas affected.

Our latest market alert previews tomorrow’s NFP release with a particular focus on the EURUSD.