Mixed U.S. economic data fueled a choppy trade in U.S. equity markets most of the day. The markets opened higher this morning following a Gross Domestic Product Report that showed the economy had contracted less than expected. Early gains were erased, however, following a report which showed a drop in the Chicago Purchasing Managers Index.
In addition to these two reports, the ADP private employment report also showed an improvement, but nonetheless it still indicated that jobs were being lost. Traders may be reluctant to buy at current levels until they can see a more robust improvement in the economy. The currency markets showed a greater demand for higher risk assets, but the tone seemed a little sluggish in the equities.
U.S. Treasury futures posted gains today as weaker economic reports indicated that the Fed was less likely to raise rates in the near future. There is still some debate going on as to how aggressive the Fed should get when it comes time to hike the rates. A consensus seems to be developing which shows that investors expect unemployment to remain high and growth to be sluggish. This is why there has been demand for T-Bonds.
The Dollar was down substantially against most major currencies on Wednesday. The weakness was fueled by greater demand for higher yielding assets following a friendly report from the IMF and less than stellar numbers from U.S. economic reports. The December Swiss Franc lost ground however when it was reported the Swiss National Bank intervened to knock down the value of the Swiss versus the Euro.
December Gold traded higher because of the weaker Dollar. Weak equity markets and stronger crude oil had some gold traders thinking about inflation. Technically, all this market did was retrace a previous down move so there still is the possibility of a secondary lower top and the start of another break.
A bullish gasoline inventory report helped December Crude Oil rally sharply higher on Wednesday. Increased consumer demand drew down gasoline stocks during the week-ending September 25th. This rally could be short-lived as the charts indicate the move was a little excessive to the upside given the news. The crude oil inventory figure was almost exactly as expected. Expect gains to be limited until demand for crude oil begins to increase.
