US dollar rebounds on positive economic reports - 3.9.2015

Global stock markets rebounded on Wednesday. US stocks rallied on Wednesday as economic data indicated further improvement in labor market and continued expansion in manufacturing. The dollar strengthened against most rivals, with the ICE US Dollar Index, a measure of the dollar’s strength against a basket of six currencies, closing up 0.5%. The S&P 500 surged 1.8%, with all of the ten sectors finishing in the green zone led by technology stocks. The Nasdaq Composite rallied 2.46%. Automatic Data Processing report showed employers added 190,000 jobs in August, more than the previous month’s 177,000 jobs. The US Labor Department reported productivity in the second quarter rose at the fastest pace since the end of 2013, and the Commerce Department report indicated factory orders rose 0.4% in July for a second consecutive month after a strong June. The Federal Reserve’s Beige Book said there were signs of increasing wage pressures due to labor market tightening, but there were also indications that the strong dollar and fall in oil prices were depressing activity. The report painted a picture of healthy US economy.Tomorrow August nonfarm payrolls will be released, which is expected to show further improvement in labor market and will be one of main economic indicators Federal Reserve’s policy makers will be considering for interest rate decision at their September 16-17 policy meeting. Given the negative impact of slowing Chinese economy on inflation, it is not clear whether they will consider the inflationary pressures from tightening labor markets sufficient to start interest rate normalization.Today at 13:30 CET initial jobless claims and continuing claims will be released in US. The tentative outlook is positive. At 15:00 CET ISM non-manufacturing PMI for August will be released. The tentative outlook is positive. At 15:30 natural gas storage change will be released by Energy Information Administration.

European stocks advanced on Wednesday as investor confidence was bolstered by news China’s brokerages have pledged to buy stocks to support faltering stock market. The euro weakened against the dollar. The Stoxx Europe 600 rose 0.3%, as well as Germany’s DAX 30 and France’s CAC 40. Today European Central Bank is expected to provide an assessment of euro-zone economy as it meets for interest rate decision. Investors expect the ECB will extend its bond buying program. Today the final readings of euro-zone services PMI came in stronger than previously estimated. At 10:00 CET euro-zone retail sales for July will be released. The tentative outlook is positive. At 12:45 CET European Central Bank interest rate decision will be released, and ECB press conference will start at 19:30 CET. Tomorrow at 7:00 CET July factory orders will be released in Germany. The tentative outlook is negative. At 10:300 CET August services PMI will be released in UK. The tentative outlook is positive.

Nikkei rebounded 0.5% today as bargain hunting propelled stocks higher. Market sentiment was supported also by PMI report that came in stronger than expected showing services sector in Japan expanded at fastest pace in almost two years in August.

Oil prices are edging lower today after the US Energy Information Administration reported an increase of 4.7 million barrels in crude supplies.

Gold is extending losses after dollar is strengthening following positive economic reports on Wednesday and Chinese markets are closed on Thursday and Friday for public holidays.