Spreadex Market Update
Financial Markets React to China's Disappointing Services PMI and OPEC+ Production Cut Expectations
Global financial markets experienced a day of fluctuation as China's Services PMI fell short of expectations and OPEC+ hinted at production cuts, while investors navigated thin trading due to the US holiday.
Key Factors for Today
- China Services PMI falls short of expectations, impacting market sentiment.
- OPEC+ hints at production cuts, giving crude oil prices a boost.
- Australia's Services PMI confirms a second consecutive month of contraction.
- Germany and Euro Area data disappoint, but EUR/USD remains resilient.
Market Movers
China's Caixin Services PMI disappointed with a reading of 51.8, compared to the expected 54.0. This downturn, coupled with the Chinese government's support for the housing market, led to increased risk and profit-taking in global markets.
Reports suggesting that OPEC+ would extend production curbs despite rising prices gave a boost to crude oil. WTI briefly touched $85.30 a barrel before closing at $85.90/bbl.
Australia's Services PMI confirmed a second consecutive month of contraction, while the Current Account fell to AUD7.7B, below the expected AUD8.0B. This data, combined with the upcoming RBA rate decision, weighed on the Australian dollar.
Germany saw an unexpected drop in its trade surplus, falling from $18.7B to $15.9B, and Euro Area Sentix investor confidence declined to -21.5. Despite these softer figures, EUR/USD remained resilient.
Economic Calendar
- RBA Interest Rate Decision
- ECB President Lagarde Speech
- ECB Consumer Expectation Survey
- HCOB Services PMI Final
- S&P Global/CIPS Services PMI Final
- Factory Orders MoM
- AU GDP Growth Rate
The Big News
China's Disappointing Services PMI Shakes Global Market Sentiment
In the wake of China's disappointing Services PMI, global markets experienced a shift in sentiment. The Caixin Services PMI, a key indicator of China's economic health, fell short of expectations, causing concerns among investors. This decline was particularly felt in the housing market, where property developers faced significant underperformance. As a result, global markets saw increased risk, with profit-taking becoming the norm.
OPEC+ Sparks Turbulence with Production Cut Hints, WTI Dips and Rebounds
On the crude oil front, OPEC+ sent ripples through the market by hinting at extending production cuts during their upcoming meeting. This decision was surprising given the recent rise in oil prices, but it led to a brief dip in WTI prices, touching $85.30 a barrel before rebounding to close at $85.90/bbl. The potential for further gains remains, with $87.80 as the next resistance level if $86 holds.
Australia's Economic Challenges Persist as Services PMI Contracts Again
Australia continued to grapple with economic challenges as its Services PMI confirmed a second consecutive month of contraction. Additionally, the Current Account fell to AUD7.7B, missing expectations. These developments put further pressure on the Australian dollar, which was down 0.63% against the US dollar.
Germany Faces Trade Surplus Contraction and Recession Concerns, but EUR/USD Holds Firm
In Europe, Germany faced unexpected setbacks as its trade surplus shrank to $15.9B from $18.7B, with a drop in exports and a rise in imports. Euro Area Sentix investor confidence also declined, highlighting Germany's continued struggle with recession. Nevertheless, EUR/USD remained surprisingly resilient, with a retest at $1.08, increasing the chances of further gains.
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