Wall Street is grumpy. Those hoping that the December 31 stock market rally would continue on the first day of trading in the new year were sadly disappointed. The blame for today’s malaise rests on China’s shoulders. The weaker than expected Caixin Manufacturing report that suggests China’s economy is contracting triggered a wave of equity market selling across the globe and it continued in New York.
The Dow Jones Industrial Average (DJIA) opened at 23,058.61, down 1.15% from the December 31 close. The S&P 500 and Nasdaq suffered a similar fate. The China data is just another nail in the coffin of global economic growth expectations.
Traders are also bearish on stocks because of fears of a prolonged US government shutdown and worries that Jerome Powell and the Federal Open Market Committee have misread the economic outlook. Concerns about a US economic slowdown received a modicum of support from this morning’s soft Markit Manufacturing PMI data.
EURUSD is the biggest loser since New York opened, falling from 1.1436 to 1.1366. The move was driven by bearish technicals after the overnight failure to break above 1.1500, and bland Eurozone data. FX markets are still thin due to holidays and won’t get back to normal until Monday. GBPUSD tracked the euro lower. Price action is a coin-flip around Brexit headlines although the bias is negative as “no-Brexit deal” fears rise.
USDJPY has climbed from a New York low of 108.85 to 109.30, coinciding with a small rise in US Treasury yields, from 2.65% to 2.67%. The intraday USDJPY technicals are bearish while prices are below 109.70.
NZDUSD bounced from 0.6665 to 0.6678 after the GlobalDairyTrade auction results showed a 2.8% rise. USDCAD sank from 1.3635 to 1.3595 after WTI oil prices rebounded from the $44.3/barrel low to touch $44,40/b.
Liquidity is still poor due to extended year-end holiday breaks. Traders are also cautious ahead of Friday’s US nonfarm payrolls data.