US Data, Fed and Commodities in Focus

US equity markets are on course to open slightly higher on Tuesday, as traders return from the long bank holiday weekend.

With only a couple of pieces of economic due to be released, focus is likely to remain on movements in commodity markets as well as the ongoing reaction to Friday’s jobs report and what it means going forward for US interest rates. The ISM non-manufacturing PMI is often keenly followed by traders, unsurprising given the importance of the services sector to the US economy.

Markets Prepare For September Volatility

The number isn’t expected to be particularly good news for the economy, with expectations being for a small decline to 55 casting further doubts on the economy’s ability to bounce back from a lackluster first half. The Markit services PMI, released over the weekend, cited economic uncertainty and the upcoming Presidential election as being behind the slowdown in growth in the sector. It will be interesting to see if this is confirmed by the ISM release today. A slowdown in hiring, as was indicated by the Markit release, due to only a moderate rise in new business will also be a concern on the back of an uninspiring jobs report. Of course, the months of June and July were much better so we can’t be too downbeat on this.

The jobs report from Friday is likely to continue to feed into market moves this week, particularly during periods of few economic releases and little news flow. The numbers on Friday are unlikely to have totally deterred the Fed from raising interest rates this year but they may have just done enough for them to hold off again this month. This is certainly the view of investors who have largely priced out a hike in September. It will take some effort from policy makers over the next couple of weeks to convince them otherwise, starting with John Williams who will speak this evening.

EUR/USD – Euro Little Changed, US Services PMI Next

Gold was given a new lease of life on Friday following the jobs report and is building on these gains again today. It has run into some resistance around $1,330, a level is struggled to move below throughout the first few weeks of August. Still, short term momentum remains to the upside and a break through here could prompt a move back towards $1,350. Dollar weakness today is helping spur the rally in Gold, as well as the broader commodity markets.

Oil has been in the spotlight again over the last 24 hours having rallied more than 5% at one point yesterday when a press conference was called for the Saudi Arabia and Russian oil ministers. The unexpected announcement sparked a sudden belief that a coordinated output freeze may be about to be announced but once again we were left listening to fluffy commitments to cooperation between the two oil producing giants. That said, oil didn’t reverse all of its gains yesterday, with traders possibly seeing this new cooperation as a precursor to future efforts to stabilize oil prices, should they get too low again.

For a look at all of today’s economic events, check out our economic calendar.

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