Stocks and USD continue to decline with ADP offering little help

Summary:

• Stocks swoon further with US500 <2900

• Dollar also declines with ADP fairly weak

• Gold pushes back above the $1500/oz mark

• Little market reaction to key UK PM speech 

Today has largely been a continuation of the moves which began yesterday afternoon after the ISM data rocked the markets. There’s been further declines seen in US indices with the US500 falling below the 2900 mark to trade down by a full 100 points (around 3.5%) since the manufacturing figures disappointed. The reaction can also be felt in European benchmarks with the DE30 tumbling and falling below the 12000 handle once more. 

Following the ISM disappointment the ADP release this afternoon was closely watched, with the release on the whole being a little disappointing. The US economy added as many as 135k new jobs last month, according to the ADP release. This number almost matched the median Bloomberg estimate calling for a 140k increase. A breakdown shows that 127k new jobs came from the service-providing sector, while the goods-producing sector added 8k jobs. However,  perhaps the most important takeaway was a sizable downwards revision to the prior reading which now stands at 157k from 195k originally. 

This data did little to alleviate concerns surrounding the US and the greenback has moved lower as a result. There’s also been an impressive recovery seen in Gold with the precious metal one of the biggest beneficiaries of this spate of soft US economic releases and the market has moved back up to trade near the $1500 level once more. Looking ahead, there’s the ISM non-manufacturing PMI due out tomorrow at 3pm (BST) but the big one as far as the markets are concerned will be Friday’s NFP. Read our full preview of the event here. 

 A keynote speech to close the Tory party conference from Boris Johnson has seen the PM double down on his prior stance and claim that the UK will be leaving the EU by October 31st “come what may”. The prime minister was typically flamboyant in his address with numerous soundbites and humorous references thrown in, but in keeping with allegations often levelled against him, also thin on the ground in terms of any real details as to how he hopes to secure a new and improved withdrawal agreement or solve the contentious backstop issue.  

The main substance of the latest proposal has been described as “two borders for four years” whereby Northern Ireland will remain in regulatory alignment with the EU - and presumably accept the freedom of movement of people within the island of Ireland - until 2025. This is far from a perfect solution to what appears an impossible problem but could well be about as good as it gets as far as a compromise is concerned. The pound has been fairly mixed on the day as traders await to see how this idea is received in Brussels with the GBPUSD rate moving back above $1.23 but more thanks to a weaker buck than a stronger sterling.