We have so much data today that we are risk of looking at none of it. We get manufacturing PMI and ISM, construction spending (August), and auto sales. Another big batch of Feds speak at various venues. A lot of attention will be diverted to the latest impeachment saga news.
We perceive that there is too much inconsistency going on. If the global economy is okay, why is oil (and gold) falling? If the economy is tanking, as experts insist, why are stock markets doing well? If the US is the source of turmoil in sentiment, why are the Swiss franc and yen not getting the safe-haven bid of yore?
At a guess, we need to wait for US-China trade talks to start up on Oct 10 before we can see a real factor at work. The rest of it is a hodgepodge without a unifying theme. Ten days is forever in trading terms. If you feel uncomfortable putting on a position, even a purportedly no-brainer, you are not alone. We can see volumes dry up and variability contract… which always leads to a breakout, but the probability of a false breakout is correspondingly higher.
On the sidelines: A free newsletter named The Chart Report picks out worthy charts and last evening the chart of the day was gold. We see a textbook head and shoulders pattern with a broken neckline that implies a further drop. We don’t get it. If fear and anxiety and gloom are on the rise, why is gold not reflecting that?
Politics: Trumpian motives are becoming clearer. The Attorney General has been twisting arms in England, Italy and Australia to invalidate the intelligence community decision to investigate the president in the first place, the investigation that ended up leading to the Mueller work. Huh? The reason seems to be to discredit the entire Mueller investigation and report so that the second round of sanctions on Russia can be lifted. Those sanctions were imposed by Congress—both houses—early in the Trump administration. Oh, and by the way, Trump wants the 2016 election interference to be attributed to Ukraine and not Russia. Never mind that Mueller identified the Russians by name.
Also, Trump recently said he thinks Ukraine may seek a deal with Russia over Crimea, i.e., let Russia have it. Then Ukraine can give permission to the US to remove the first round of sanctions, imposed pre-Trump in 2014. In a nutshell, Putin wants the sanctions lifted. Trump is trying to help him achieve that goal. This is a thesis put forward last night by Maddow on TV, and alas, we find it credible. So does the former US ambassador to Russia.
Never mind that the Russian invasion and occupation of Crimea is the first such act of territorial aggression since WW II and shocked the free world, especially those parts newly freed and dangerously close to Russia, like the Baltic states, who are, after all, members of NATO. Throwing Russia out of G7 and imposing sanctions is not about Ukraine itself, but rather about the US leading and largely paying for visible, credible defenses against Russia.
This week the Intelligence committee will get testimony from various officials, including a former ambassador to Ukraine ignominiously fired without cause and the most recent “envoy,” who quit. We may get additional information about the role of personal Trump lawyer Giuliani and Secretary of State Pompeo, who witnessed the solicitation phone call with the Ukrainian president. Pompeo was outed by a high official in his own department—another whistleblower, so to speak, possibly because Pompeo pretended to know nothing about it on TV, and more than once. Let’s not forget that two of Nixon’s attorneys general ended up in the hoosegow. VP Pence might end up getting implicated, too.
What fun! Who is next in line for the presidency if both the president and vice president get booted out? Speaker of the House Pelosi. Fortunately, she doesn’t want it. In case you missed it, go find a tape of “The West Wing,” a really good TV show now 20 years old. At one point, the president has to recuse himself and there is no VP, so the speaker takes over, played by John Goodman, an opposition party member. He has some splendid lines about his duty not to undermine the principles of the existing government.
The pace of the impeachment saga is breathtaking. Two new polls show a rise in the percentage of voters who say they approve of the impeachment inquiry—by about 10 points. The Quinnipiac poll has support for impeachment and removal up by 10 points, with a 23-point rise among whites with college degrees. The net is still about half pro and the other half con, but this is a huge rise in a single week. The other poll comes from CNN and shows a 21% gain in Republicans who favor impeachment from last May. Below is a chart showing the most interesting outcome: evidently we really do know that seeking personal political advantage from a foreigner is wrong. Over half of both Dems and Plubs say so. Now to keep the obstructors—Giuliani, Barr, at al.—from dragging the process out for so long and muddying the water so much that we forget why and how we got here in the first place.
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EUR/USD is trading around 1.0950 after ADP NFP missed with 135K jobs gained in September and a downward revision for August. The figure joins other misses and weighs on sentiment.
GBP/USD is rising above 1.2300. PM Johnson has laid down a detailed Brexit plan that the DUP supports. The EU is set to react to the proposal later today.
Tuesday’s dismal US ISM PMI weighed on the USD and prompted some long-unwinding trade. A modest uptick in the US bond yields extended some support to the USD on Wednesday. Traders look forward to US ADP report for some short-term impetus ahead of Friday’s NFP.
The purchasing managers’ index from the Institute for Supply Management (ISM) turned in a 47.8 score for September, the lowest this gauge has been since June 2009.
Following its pullback from early-August lows, Gold prices fail to remain strong as buyers await fresh signals of recent risk aversion. The yellow metal presently declines to $1,476.16 ahead of the European open on Wednesday.
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