Global stocks decline as slowdown fears escalate
Global stocks declined sharply over recession fears. Yesterday, the Dow declined by 500 points while Nasdaq declined by 125 points. Before that, UK’s FTSE dropped by 237 points, which was its worst day since 2016. The decline was in reaction to Tuesday’s ISM data which showed that manufacturing activity in the US dropped to the lowest level since 2008. The decline also came after the WTO handed the US a victory on its litigation about Airbus subsidies. Shortly after the verdict, the US announced that it will put additional tariffs on goods from the EU. This will further affect the stability of the world’s economy.
Sterling was relatively unchanged after Boris Johnson unveiled his revised Brexit plan in a speech to Conservatives. According to his plan, there will be no customs check at Northern Ireland. Northern Ireland would also leave the EU Customs Union at the end of the transition period. However, the proposals appeared to be a nonstarter for the European Union. According to reports, Michel Barnier gave a scathing analysis of the new offer and described it as a trap. The EU has insisted on a backstop, which it believes is necessary to protect the Good Friday Agreement.
Later today, traders will receive the services PMI data from Spain, Germany, and the UK. In Spain, the services PMI is expected to decline from 54.3 to 53.8. In Germany, the composite PMI is expected to decline from 51.7 to 49.1. Services PMI is expected to decline from 54.8 to 52.5. In the UK, the services PMI is expected to have declined from 50.6 to 50.3. In the EU, retail sales are expected to decline from 2.2% in July to 1.9% in July. The PPI for August is expected to have declined from 0.2% to -0.5%. Meanwhile, from the United States, the ISM non-manufacturing PMI is expected to have declined from 56.4 to 55.0. The ISM non-manufacturing business activity is expected to have declined from 61.5 to 59.0.
The EUR/USD pair has been on an upward trend and is currently trading at 1.0960. This is higher than the weekly low of 1.0878. On the hourly chart, this price is slightly lower than the 38.2% Fibonacci Retracement level and slightly higher than the 14-day and 28-day moving averages. The RSI has flattened below the overbought level of 70. The on-balance volume too has been rising. The pair might continue moving higher to test the 50% Fibonacci Retracement level of 1.1000.
The EUR/GBP pair has been moving higher after bottoming at the 0.8783 level. The pair is now trading at 0.8910, which is along the 23.6% Fibonacci Retracement level on the four-hour chart. The price is above the 14-day and 28-day moving averages while the RSI has been moving higher. The two lines of the Relative Vigor Index has continued to move higher. The pair might continue moving higher to test the 38.2% Fibonacci level of 0.8990.
The XBR/USD pair declined after the EIA reported that inventories rose by 3.1 million barrels. The market was expecting the inventories to rise by more than 1.5 million barrels. The XBR/USD pair declined to a low of 57.00. This was lower than where the price was before the Saudi Arabia attacks. The pair is trading below the 14-day and 28-day moving averages. The oscillator of moving average has remained at the neutral level. The pair will likely continue moving lower.