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US dollar banknotes are seen in this illustration taken on March 10, 2023. Reuters/Dado Ruvik/Illustrations/File Photo/File Photo Get Licensing Rights
A look at the day ahead for US and global markets from Mike Dolan
August global trading continued to be volatile in Europe and China, while a jump in oil prices dimmed deflation hopes – sending the US dollar rallying again.
The dollar index against most-traded currencies (.DXY) rose to its highest since May on Tuesday – just as US markets returned from the long Labor Day weekend, still witnessing brisk job creation, growing workforce Digesting Friday’s somber employment report of participation and low wages. Development.
The recent back-up in oil prices – which has seen year-on-year deflation decline to less than 10% from 40% in June – will continue to haunt the back end of bond markets and keep central banks from Will keep troubling
But the US jobs picture undercuts the “soft-landing” consensus — something that may not be the case elsewhere, Tuesday’s update on last month’s global business surveys showed.
The dollar’s latest jump was prompted on Tuesday by news that Chinese services sector growth hit an eight-month low last month, undercutting Monday’s optimism about a temporary recovery in an allied survey on manufacturing.
Even though there has been some respite from the messiness of the ongoing property crisis in China – as real estate giant Country Garden made a few dollar bond payments at the last minute – the stench clearly remains in the wider economy. The offshore yuan recently fell sharply back from levels achieved by indirect official intervention.
Euro zone peer surveys later in the day showed an even bigger contraction in activity than “flash” initial estimates for August – with the all-sector index falling nearly two points to 46.7 in August, its lowest since November 2020. Not seen less.
This brought the euro back against the dollar to levels not seen since mid-June.
Although UK business is also posting its sharpest decline in seven months, it was slightly above the “flash” reading. But that brought little relief to sterling, which was pushed down by the dollar to its lowest level since June.
Meanwhile, the Australian dollar edged closer to its lowest level in a year as the Reserve Bank of Australia, chaired by Governor Philip Lowe, kept interest rates on hold for a third month in a row.
Sour business surveys dampened some of the recent rally in oil prices, but did nothing to calm the long-term slump in the bond market.
Despite little or no change in Federal Reserve interest rate expectations since Friday, 10-year Treasury yields — which rose sharply just before the weekend — continued to rise above 4.20%. A mix of fiscal concerns around energy price concerns, a massive corporate bond sale schedule and a possible government shutdown next month were all cited.
All stock markets in China and Europe were in the red, with Wall St futures down slightly ahead of Tuesday’s open.
In corporate news, shares in English football club Manchester United (MANU.N) plunged nearly 10% premarket after UK newspaper The Mail reported on Sunday that the club’s owners, the Glazer family, are going to take the club off the market. Because they failed to do so. Get close to their expected asking price in a long effort to sell it this year.
Events to watch on Tuesday:
* US August Employment Trend, July Factory Orders
* European Central Bank Vice President Luis de Guindos and ECB Board Member Isabelle Schnabel speak at the ECB Legal Conference
* US Treasury Auction 3-, 6-, 12-Month Bills
* US Corporate Income: Zscaler
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By Mike Dolan, Editing by Hugh Lawson [email protected], Twitter: @reutersMikeD
Our Standards: The Thomson Reuters Trust Principles.
Opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed to integrity, independence and freedom from bias under the Trust Principles.
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Source: www.reuters.com
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