Financial market research and analysis

Chinese manufacturing activity unexpectedly expanded in August, according to the official PMI data. China’s factory stats improved to the best levels seen in two years. Property and infrastructure spending are pointed out as the main energy boosts in China, while exports remain weak, leaving the world’s largest emerging market with a significant excess capacity and an encumbering debt load.

The stabilisation in China’s slowdown is one less nuisance for the global economy, and the Federal Reserve (Fed). It appears that China is turning towards its gigantic domestic market to seek growth, rather than the stagnating Western markets. If successful, China’s new balance could only benefit the global economy.

In the US, the ADP employment data came in line with the consensus. The US economy added 177’000 private jobs in August, while the July figures were revised higher to 194’000 from 179’000.

Of course, the billionaire investor Bill Gross’ call for two Fed rate hikes before March 2017, with the first rate hike to happen as early as September, also enhanced enthusiasm in the Fed-hawks’ camp.

Overall, the satisfactory ADP report and the hawkish comments from Bill Gross are set to keep the mood positive for the US dollar heading into Friday’s non-farm payroll figures.

Oil took a dive on news that Gulf coast output hit a new record. The barrel of WTI traded at $44.50 in New York yesterday, and the petite appetite in Asia, despite the strong Chinese PMI data, kept the price of a barrel below $45.

In an effort to temper the sell-off, Saudi whispered it wouldn’t flood the oil market, yet the latest comments failed to charm buyers, as many would agree that Saudi is already playing a big role inundating the market with cheap oil.

Investors demand significant action, or at least a solid hint to cut production at the informal OPEC meeting in September. Otherwise, the barrel of WTI would remain capped below the $50 into the end of the year.