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• Says there is a way of getting a deal but it will require a lot of hard work

The Job Openings and Labor Turnover Survey (JOLTS) published by the Labor Department on Tuesday showed a marginal drop (-0.4 percent m-o-m) in the U.S. job openings in July.

According to the report, employers posted 7.217 million job openings in July, compared to the June figure of 7.248 million (revised from 7.348 million in original estimate) and economists’ expectations of 7.300 million. The job openings rate was 4.5 percent in July, down from an unrevised 4.6 percent in the prior month. The report showed that the number of job openings was little changed for total private and for government. The job openings level fell in wholesale trade (-55,000 jobs) and in federal government (-11,000), but increased in information (+42,000) and in mining and logging (+11,000).

Meanwhile, the number of hires rose to 5.953 million in July from 5.716 in June. The hiring rate was 3.9 percent, up from 3.8 in June. The number of hires edged up for total private (+219,000) and was little changed for government. The hires level was little changed in all industries.

The separation rate in July was at 5.759 million or 3.8 percent, compared to 5.513 million or 3.6 percent in June. Within separations, the quits rate was 2.4 percent (+0.1 pp m-o-m), and the layoffs rate was 1.2 percent (+0.1 pp m-o-m).

Josh Nye, the senior economist at the Royal Bank of Canada (RBC), notes that Canada's housing starts picked up to 227,000 annualized units in August as the 6-month trend is the strongest in more than a year and the building permits for July came in at a solid 221,000.

• “Canada’s housing recovery is on. The 6-month trend in housing starts is now just shy of 2017’s annual pace, which was the fastest in a decade. The pickup in starts, after a slowdown through much of 2018 and the first half of this year, mirrors a recovery in resale markets in recent months. The residential sector added to growth in Q2 for the first time in more than a year, and it looks like we’re in for a repeat performance in Q3.
• Regionally, the trend in housing starts in Quebec and BC is running close to cycle highs while the Prairies are seeing a modest recovery. Ontario, which was a laggard over the first half of the year, saw a nice increase in August and that helped the 6-month trend hook higher.”

• We have been very conservative with demand forecasts
• The OPEC+ charter is open to all producing countries
  
• Says he sees no recession on horizon, U.S. economy doing well

• Wants to get USMCA done in 30-60 days
• So many times in the past year-and-a-half the news has been wrong
• Investors should play the long game
• They're manipulating their currency down into the toilet
• They're losing their supply chain faster than you can say 'Trump tariffs'
• We need to be patient with regards to U.S.-China trade negotiations

U.S. stock-index futures fell slightly on Tuesday, as disappointing economic data from China signaled slowing growth in the country, reigniting worries about a global recession.

Global Stocks:

(company / ticker / price / change ($/%) / volume)

DuPont (DD) initiated with a Buy at Jefferies; target $85

Altria (MO) downgraded to Neutral from Overweight at Piper Jaffray; target lowered to $49

Statistics Canada announced on Tuesday that the value of building permits issued by the Canadian municipalities rose 3.0 percent m-o-m in July, following a revised 3.1 percent m-o-m drop in June (originally a 3.7 percent m-o-m decline).

Economists had forecast a 1.5 percent advance in July from the previous month.

According to the report, the value of residential permits increased 2.2 percent m-o-m in July, as permits for multi-family dwellings surged by 4.2 percent m-o-m, while single-family permits fell by 0.2 percent m-o-m.

At the same time, the value of non-residential building permits climbed by 4.3 percent m-o-m in July, due to gains in institutional (+7.6 percent m-o-m) and commercial (+6.7 percent m-o-m) permits, which however were partially offset by a decline in industrial permits (-6.9 percent m-o-m).

In y-o-y terms, building permits rose 0.7 percent in July.

The Canada Mortgage and Housing Corp. (CMHC) reported on Tuesday the seasonally adjusted annual rate of housing starts was at 226,639 units in August, up 1.9 percent from an upwardly revised 222,467 units in July (originally 222,013 units).

Economists had forecast an annual pace of 204,500 for August.

According to the report, urban starts rose by 2.0 percent m-o-m last month to 213,663 units, as single-detached urban starts surged by 13.6 percent m-o-m, to 53,275 units, while multiple urban starts fell by 1.4 percent m-o-m to 160,388 units. At the same time, rural starts were estimated at a seasonally adjusted annual rate of 12,976 units, up 0.4 percent m-o-m.

• PM to meet DUP’s Foster and Dodds later on Tuesday to discuss a range of issues, including Brexit talks
• PM stressed that he wants a deal
• Says can expect PM to continue to speak to other EU leaders in coming weeks

• BoJ's decision on whether and when to ease will be a close call, the conclusion may not come until the last minute
• Taking the rates further into negative territory is among options if the BoJ were to ease, but other options are not off the table

• Hopes that trade talks will make progress

Analysts at TD Securities note that Canadian housing starts and building permits will deliver an update on residential investment for Q3.

• “TD looks for housing starts to recover to a 230k (market: 212k) on more favorable weather conditions along with signs of green shoots the resale market. Meanwhile, the market consensus is for a 2.0% rebound in building permit issuance for July.”

Andrew Hanlan, an analyst at Westpac, notes that Australia’s NAB business survey for August shows that policy stimulus has yet to provide a boost to the economy as in a surprise result, conditions not only failed to rise but weakened further.

• “The business conditions index fell, down by 2pts to +1. This, a below-average reading, is the softest result since 2014.
• Business confidence fell by 3pts to +1, a well below average reading. Confidence has evaporated against a challenging domestic backdrop and a deteriorating and uncertain global environment.
• The NAB survey indicates that the weaker economic conditions evident in 2019 have extended well into the September quarter.”

The National Federation of Independent Business (NFIB) reported on Tuesday the Small Business Optimism Index decreased by 1.6 points to 103.1 in August, reversing a 1.4-point gain posted in July.

The August decline in the headline index was attributable to a drop in expectations for business conditions and real sales volumes in the coming months. Meanwhile, job creation accelerated, positive earnings trends improved, and q-o-q sales gains remained strong.

According to the report, six of 10 index components declined, three rose and one was unchanged. It also revealed that small business owners’ plans to create new jobs and increase inventories decreased slightly, while their plans to make capital outlays increased.

“The August report does not show a sign of inflation or reflect what the Fed has noted,” said NFIB Chief Economist William Dunkelberg. “The pessimism we’re seeing is contagious, even though the actual economy is thriving. Expectations can be infected and, as a result, could turn sour. All the talk about an impending recession can create a false reality, but it doesn’t make it right. Main Street is continuing to produce and remains strong in spite of the headlines.”

ANZ Research discusses its expectations around this week's ECB September policy meeting. "A 'bazooka' refers to a package deal with a rate cut and further QE.

"The September policy decision will be an important one. The market expects a cut to the benchmark rate coupled with a resumption of asset purchases," ANZ notes. 

Anything short of this is likely to light a candle under the euro, which has been weighed down by expectations of QE. Recent division over policy on the ECB board suggests this a real possibility," ANZ adds.

According to Danske Bank analysts, Thursday's ECB meeting is the most awaited ECB meeting in more than a year.

“The stakes are high as inflation expectations are far below target amid lingering economic uncertainty, which means we believe the Governing Council will be forced to act. However, the Governing Council members are divided about the need for further stimuli, although we do not think the hawks will be strong enough to prevent a bold package but the risk of a less aggressive compromise (smaller volume with longer purchase period) exists. In recent days, risk on has been the dominant market theme, reflecting better risk sentiment and likely lower QE expectations. Ultimately, the market reaction will depend on the ECB's credibility, willingness and commitment to do 'whatever it takes' and, in our view, sending these signals is more important than the exact design of the measures. We remain sceptical about the inflation/economic impact of 'more of the same'; however, the absence of action in the current environment would be worrying.”

German Finance Minister Olaf Scholz said that companies around the world were waiting for a sign of improvement in the tariff dispute between the United States and China, adding a solution to the dispute was needed quickly.

“Everywhere in the world companies are waiting to finally get a positive signal that things are moving in another direction again so they can finally invest,” Scholz told the Bundestag lower house of parliament.

“It is urgently necessary for the U.S. and China to reach an agreement in the trade dispute,” he added.

According to the report from Istat, in July 2019 the seasonally adjusted industrial production index decreased by 0.7% compared with the previous month. The percentage change of the average of the last three months with respect to the previous three months was -0.3%. Economists had expected a 0.1% decrease. The index measures the monthly evolution of the volume of industrial production (excluding construction). With effect from January 2018 the indices are calculated with reference to the base year 2015.

The calendar adjusted industrial production index decreased by 0.7% compared with July 2018 (calendar working days being 23 versus 22 days in July 2018).

Industrial output, on an unadjusted basis, expanded 2.4% annually, in contrast to a 4.2% decrease in June. This was the fastest growth since October.

According to Axel Rudolph, analyst at Commerzbank, USD/JPY pair has now overcome the mid-August high at 106.98, a daily chart close above which has confirmed a bottoming formation with the July and August highs at 108.99/109.32 thus being in focus.

“En route are the July 3 low at 107.54 and the early June low at 107.81. Minor support sits at the 105.74 current September low. Good support below the 105.74 low can be spotted between the mid and late August lows and the 200 month moving average at 115.05/104.38. Further down sits the January low at 104.10. Failure at 104.10 would target the 2016 low at 99.00.”

• 2020 budget is expansionary

• budget will tackle great challenges, including global trade disputes

• Germany is not in a crisis, has solid fiscal position

• "we will react should there be a crisis"

According to the report from Office for National Statistics, the UK employment rate was estimated at 76.1%; this is the joint-highest on record since comparable records began in 1971, and higher than a year earlier (75.5%).

The UK unemployment rate was estimated at 3.8%; this is lower than a year earlier (4.0%) and unchanged on the quarter. Unemployment rate has not been lower since October to December 1974. The estimated UK unemployment rate for men was 4.0%, relatively unchanged from a year earlier. The estimated UK unemployment rate for women was 3.6%, the joint-lowest since comparable records began in 1971 and 0.4 percentage points lower than a year earlier (4.0%)

The UK economic inactivity rate was estimated at 20.8%; this is lower than a year earlier (21.2%) and unchanged on the quarter.

Estimated annual growth in average weekly earnings for employees in Great Britain increased to 4.0% for total pay (including bonuses), and fell to 3.8% for regular pay (excluding bonuses).

In real terms (after adjusting for inflation), annual growth in total pay is estimated to be 2.1% and annual growth in regular pay is estimated to be 1.9%.

Pay growth is watched closely by the Bank of England to gauge future inflation pressures, and the latest increase was stronger than all forecasts in a Reuters poll of economists.

"Once adjusted for inflation, they have now gone above 2% for the first time in nearly four years," ONS statistician David Freeman said.

Gold prices may rally to a record above $2,000 an ounce in the next two years, according to Citigroup Inc., which gave a laundry list of positive drivers including rising risks of a global recession and the likelihood that the Federal Reserve will reduce U.S. interest rates to zero.

“We expect spot gold prices to trade stronger for longer, possibly breaching $2,000 an ounce and posting new cyclical highs at some point in the next year or two,” analysts including Aakash Doshi said. That would exceed the record of $1,921.17 set in 2011.

Low or lower-for-longer nominal and real interest rates; global recession risks -- exacerbated by U.S.-China trade tensions; and heightened geopolitical rifts are “combining to buttress a bullish gold market environment,” the bank said. Also, “in affinity to our U.S. rates research colleagues, we believe the Fed will ultimately end up cutting rates all the way to zero,” the analysts wrote.

“For now, the U.S. consumer and potential growth story is holding up,” Citi said in the note. However, “we remain more concerned about market signals -- three-month to 10-year yield curve inversion -- and leading indicators that are weakening at the fastest pace since the Great Recession,” it said.

Concerns about global trade have reached nearly 10 times the peaks seen in previous decades and could shave about 0.75 percentage point off world economic growth this year, according to data compiled by the International Monetary Fund.

The Americas and Asia-Pacific are most affected by concerns about the U.S.-China trade war, while Africa is least affected, the IMF said in a new index aimed at quantifying trade uncertainty.

The index is based on reports from the Economist Intelligence Unit dating back to 1996 and borrows from methodology used in the IMF’s own World Uncertainty Index. To calculate the new gauge, IMF researchers counted how often the word “uncertainty” appears in the EIU reports near terms such as “tariffs,” “protectionism” or “trade.“

Following 20 years of stability, the World Trade Uncertainty index started to climb around the third quarter of last year, coinciding with tariff action by the U.S. and China, according to the IMF. After a brief respite the index rocketed up in the first quarter of 2019, reflecting a substantial increase of U.S. tariffs on Chinese imports on March 1, the IMF said.

According to the report from INSEE, in July 2019, output increased slightly in the manufacturing industry (+0.3%, after −2.2%), as well as in the whole industry (+0.3%, after −2.3%).

Over the last three months, output declined in manufacturing industry (−0.3%) and increased in the whole industry (+0.4%).

Over the last three months, output grew strongly in mining and quarrying, energy, water supply (+4.3%) and more moderately in “other manufacturing” (+0.3%). Conversely, it dipped in the manufacture of transport equipment (−1.1%), in the manufacture of machinery and equipment goods (−1.1%) and in the manufacture of food products and beverages (−0.6%). It plummeted in the manufacture of coke and refined petroleum products (−7.1%).

Manufacturing output of the last three months increased compared to the same three months of 2018 (+0.7%), as well as in the whole industry (+1.2%).

Danske Bank analysts point out that the German Bundestag will start discussing the budget for 2020 today and will be a key event for the German markets.

“Yesterday we had two interesting stories out. First the Reuters story that Germany is considering a 'shadow budget' to circumvent the 'black zero' and the 'debt brake'. Later in the day Bloomberg reported that the Finance Minister has written to lawmakers in the Bundestag arguing that budget changes are possible if there should be a need due to overall economic developments or external factors. European yields continued to move higher and the curve bear steepened yet again as markets increasingly starts to price in higher bond supply next year and a QE disappointment from the ECB on Thursday. The negative bond sentiment was also fuelled as German export surprised on the upside in July rising 0.7% m/m. Risk appetite almost remained positive as Treasury Secretary Mnuchin said that US and China have made 'lots of progress' on trade-talks.”

EUR/USD

Resistance levels (open interest**, contracts)

$1.1207 (1729)

$1.1184 (1901)

$1.1155 (940)

Price at time of writing this review: $1.1050

Support levels (open interest**, contracts):

$1.0979 (3969)

$1.0936 (3017)

$1.0891 (2028)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date October, 4 is 73681 contracts (according to data from September, 9) with the maximum number of contracts with strike price $1,1100 (4493);

GBP/USD

Resistance levels (open interest**, contracts)

$1.2510 (518)

$1.2467 (246)

$1.2438 (182)

Price at time of writing this review: $1.2340

Support levels (open interest**, contracts):

$1.2192 (925)

$1.2115 (1176)

$1.2074 (745)

Comments:

- Overall open interest on the CALL options with the expiration date October, 4 is 14574 contracts, with the maximum number of contracts with strike price $1,2500 (1934);

- Overall open interest on the PUT options with the expiration date October, 4 is 13178 contracts, with the maximum number of contracts with strike price $1,1900 (1556);

- The ratio of PUT/CALL was 0.90 versus 0.86 from the previous trading day according to data from September, 9

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.