Risk-off sentiment eases amid ongoing tensions 

* Stocks steady, oil rise slows as wary investors eye Middle East

* Dollar gains on ADP which shows decent job gains

* Yen plunges as new PM, BoJ Governor dim rate hike hopes

* Gold loses sheen on profit taking despite geopolitical tensions

FX: USD rose for a third straight day and broke to the upside after better-than-expected ADP jobs data. While the figure exceeded the forecast range, it has very little correlation with Friday’s NPF headline number. Resistance sits around 101.88.

EUR slid for a fourth day in a row with eyes on the mid-September low at 1.1001. The region’s jobless rate came in unchanged at 6.4%. An ECB official said all options were still open for the October rate decision and the ECB need to watch services inflation.

GBP moved down closer to the 21-day SMA at 1.3236. There was little news flow out of the UK. EUR/GBP is hovering just below a key long-term level at 0.8339.

USD/JPY underperformed strongly on dovish comments from PM elect Ishiba. He said Japan is not ready for another rate hike the, while the newly appointed economy minister said they should be careful about raising rates again. The BoJ’s Governor Ueda also remarked that markets remain unstable, and Japan’s economy is recovering, moderately albeit with some weak signs. The major broke to the upside through 145 and closed right on last Friday’s spike high during the LDP election at 146.49.

AUD settled very marginally higher printing an inside day. The major still trades in the pivot zone of 0.6871/99. USD/CAD had a relatively quiet day as it says above major support at 1.3436.

US Stocks traded mixed but relatively flat. The S&P 500 closed 0.01% higher to settle at 5,709. The tech-dominated Nasdaq 100 added 0.15% to finish at 19,802. The Dow closed up 0.09% at 42,196. Energy and tech were the major sectors in the green. Nvidia rebounded off its 21-day SMA at $115.66 on positive broker comments. Nike saw the biggest drop on the Dow and one of the sharpest on the S&P 500, falling 6.8%. The sport apparel giant withdrew its full-year guidance and postponed its investor day due to its CEO transition. Sentiment is still cautious on the Middle East tensions.

Asian stocks: Futures are mixed. Asian stocks were also mixed with muted moves due to the Middel East tensions. The ASX 200 was stuck in a range with tech down and commodity industries up. The Nikkei 225 slumped on the open and slid below the 38,000 marker. The Hang Seng reopened and jumped on last week’s bumper stimulus measures. Strength was notable in tech and real estate.  

Gold fell modestly as it printed an inside day where the high and low of the day traded between yesterday’s range. Yields were slightly higher.

Day Ahead – US ISM Services and UK Survey data

Expectations are for the Services PMI to rise very modestly higher to 51.7 in September from 51.5 in August. The similar S&P Global’s PMI data for September showed US services business activity at a two-month low. Inflows of new work will be watched as the S&P figure got close to August’s 27-month high, while new export orders for services rose at an increased rate. Of course, a lot of focus is on Friday’s US monthly job data. Odds of a 25bps November Fed rate cut are seen at 64%.

The release of the Bank of England’s Decision Maker Panel survey will be of interest. The BoE places a lot of faith in these numbers, and they’re signalling that both wage and price growth are slowing fast. Those are key data ppints for poliymakers. Markets currently see the MPC as a relative hawkish outlier. That has supported sterling and seen it lead its major peers this year versus the dollar.

Chart of the Day – Chinese stocks rampant

The home of poor 2024 market performance did an incredible about-turn last week, with the main Chinese stock index, the CSI 300, recently rising 24% over five sessions. The PBoC and regulators unleashed a series of stimulus measures on different days to shore up the economy, both monetary and fiscal. These included interest rate cuts, support for the property market and even efforts aimed at boosting stocks. On top of this, reports suggested China’s big banks will be recapitalised with 1 trillion CNY ($142 billion).

China’s top leaders dedicated their monthly meeting in the Politburo to the economy, which is normally not the case in September. This sent a clear signal that turning the economy around is now their number one priority. It is the biggest round of stimulus since the current crisis started three years ago and could turn out to be China’s ‘whatever-it-takes’ moment. Most economists are now seeing upside risks to growth estimate of sub-5% this year and next. The one-week National Holiday started on Tuesday with policy makers likely hoping for the measures to lift confidence when millions of families get together across China. The next major upside level is a retracement Fib (38.2%) of the 2021 to 2024 sell-off at 4,186. Support is the minor Fib (23.6%)  at 3,774.