The risk sentiment improves after China’s PMI figure is revealed - Market Overview

By: Miguel A. Rodriguez

13:59, 04 August 2021

China’s PMI for July exceeded the result from June (54.9 vs 50.3), leading to improved market sentiment, especially after the slowdown reported by other leading Asian indicators.

However, in Europe, the published PMI results for July were more affected by the COVID-19 delta variant, revealing less impressive results.

This afternoon the ISM non-manufacturing is scheduled for publishing in the United States. The markets expect a 60.5 figure, slightly higher than the 60.1 recorded the previous month.

However, the most anticipated figure for today will be the ADP Non-farm employment change, with a job creation forecast of 695k. This report is published two days before the non-farm payroll and the unemployment rate. It could set the tone for financial markets, as employment is one of the main objectives of the Federal Reserve's monetary policy. A substantial change in the forecast figure could prove relevant for assets such as the U.S Treasury bonds and the USD.

Today the markets have stabilized thanks to the better performance of the Asian stock markets after the publication of the Caixin PMI for services in China. However, yesterday, the market performance was more typical of risk aversion with falls in USD/JPY below 109.00 and setbacks in commodity markets.

Oil fell almost $3 on the day due to fear of new mobility restrictions, potentially affecting global demand for crude. After a week of an upward correction, black gold retreated, and it approached the support zone located around 67.20, below which it would open the way to falls of greater depth. The EIA's inventory figure scheduled for publishing this afternoon could impact prices in case inventories rise above the forecast.

A weaker performance is also noticeable in the case of Copper. After the recovery, which began on July 20, Copper lost ground again, approaching important levels of support located at 4.36 in the first place and then in the 4.15 area. Should it reach these levels, it could lead to greater corrective movements.

Sources: Bloomberg, reuters.com.

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