Shaky Service Data Moves Markets with Gold & Silver Being a Beneficiary

The dollar tumbled after a poor showing in data released by the Institute of Supply Management. The data reflected the slowest growth in six-plus years in the service sector. That, in turn, lowered expectations for an interest-rate hike by the Federal Reserve. Of course, that depressed the dollar.

The greenback is off about 1.00% against the euro and the British pound and 1.40% against the yen.

Gold, which is up an aggregate $22.00, saw a good portion (about $12.70) of its rise tied to the weaker dollar. Silver was in the same boat but in even more luxurious accommodations. The gray precious metal is up 2.60%. Platinum and palladium also saw robust prices increases.

Oil has been bounced all over the lot today. West Texas Intermediate has gone up significantly, fallen by 2.00% and then come back in the afternoon to rise about 1.00% on fickle reports concerning a possible production freeze by OPEC and other large producers.

Brent North Sea has been a whole other matter. It is down nearly 0.70%, mostly on the strength of the pound and euro. There is a little bit more faith, too, in the European oil trading pits in the ability of the U.S. to keep a lid on oil prices by increasing production.

Not surprisingly, equities are doing well but not going gangbusters on the conflicting news and data.

An acquisition also nudged equities higher a tad. Bayer upped the ante for buying Monsanto, the offer going from $125 per share to $127.50

There is a small push from oil but mostly the rise is due to telecom action and is most clearly reflected in the 0.50% rise on the NASDAQ, a closing record high. But, it should also be noted that the struggling ISM data leads stock investors to think there will be no rate hike later this month and money will continue to be free and easy.

Indeed, the CME FedWatch probability tool tells us that the likelihood of an interest rate rise in September is now around 15%. Last week it hovered between 20% and 25% on a consistent basis.

The prospects of a change in rates has not yet really affected the December betting on the CME. It’s about the same as it was last week, tending toward lower expectations.

While the VIX gauge of volatility is up 2.60% today, that is mainly on the ISM news and the index is still below 13.00, a very subdued level.

We also look forward to higher volumes as the holiday-shortened week progresses as the full complement of traders, investors and other assorted Wall Street pooh-bahs take up positions after the summer doldrums and Labor Day’s last-gasp break.

Wishing you as always, good trading,