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At Wednesday's stock market close, the Dow Jones Index (US30) decreased by 0.57%, while the S&P 500 Index (US500) lost 0.70%. The Nasdaq Technology Index (US100) closed yesterday negative by 1.06%. The Dow Jones (US30) and Nasdaq (US100) indices fell to one-week lows as the dollar index continued its rally.

US economic news on Wednesday provided support for the US dollar after the ISM Services Business Activity Index for August unexpectedly rose by 1.8 to a 6-month high of 54.5, which was stronger than expectations of a decline to 52.5. In addition, the trade deficit widened to $65.0 bln. in July from $63.7 bln. in June, less than expectations of $68.0 bln. Comments from Fed President Boston Collins on Wednesday were somewhat hawkish and lent support to the dollar when she said it was "too early" to say inflation was on a steady path toward 2% and further tightening could be warranted depending on the data. She added that the Fed "will have to keep rates at restrictive levels for some time" as, although demand is easing, it continues to outpace supply, adding to price pressures. Markets rate the odds of a 25 bps rate hike at the September 20 FOMC meeting at 8% and a 25 bps rate hike at the November 1 FOMC meeting at 54%.

The Bank of Canada had expectedly kept the interest rate unchanged at 5%. While the Bank of Canada's communication indicates the possibility of a future rate hike, markets remain skeptical amid looming economic headwinds. The central bank acknowledged the current difficulties, noting that the economy has entered a period of weaker growth coinciding with a decline in consumption and housing activity.

Equity markets in Europe were mostly down on Wednesday. Germany's DAX (DE40) decreased by 0.34%, France's CAC 40 (FR40) was not trading due to the holiday, Spain's IBEX 35 (ES35) was down by 0.83%, and the UK's FTSE 100 (UK100) closed negative by 0.16%.

Eurozone retail sales for July fell by 0.2% m/m, matching expectations and marking the first decline in four months. Factory Orders in Germany fell by 11.7% m/m in July, weaker than expectations of 4.3% m/m and the biggest decline in 3 years. But despite all this gloom, ECB officials are trying to convince the currency markets that they may still go for policy tightening next week. ECB's Kazimir said that a rate hike in September is preferable to a later one. Klaas Knot also warned that markets may be underestimating the likelihood of the ECB raising rates next week.

At a speech yesterday, Bank of England Governor Andrew Bailey suggested that UK interest rates may not need to be raised again, saying that a "marked" decline in inflation is likely this year and that monetary policy is probably "near the top of the cycle." The pound sterling exchange rate fell to a three-month low.

Oil prices were supported after Saudi Arabia said on Tuesday that it would maintain its unilateral 1 million BPD oil production cut through December. The move will keep Saudi Arabia's oil output at around 9 million BPD, the lowest in three years. In addition, Russia announced on Tuesday that it would also maintain a 300,000 BPD cut in oil production through December. Oil prices are also supported by expectations that today's weekly EIA oil inventory data will show a decline of 2 million barrels. Limiting the growth of oil prices is the rally of the dollar index, which reached a 5-month high on Wednesday.

Asian markets traded yesterday without a single dynamic. Japan's Nikkei 225 (JP225) rose by 0.62%, China's FTSE China A50 (CHA50) fell by 0.15%, Hong Kong's Hang Seng (HK50) gained 0.06% on the day, and Australia's S&P/ASX 200 (AU200) was negative by 0.78% on Wednesday. Most Asian stocks fell on Thursday as trade data pointed to continued weakness in the Chinese economy.

On Thursday, customs data showed China's exports fell by 8.8% year-on-year in August, and imports fell by 7.3%, adding pressure on the country's vast manufacturing sector amid weaker demand at home and abroad. The world's second-largest economy risks falling short of Beijing's annual growth target of about 5% as officials grapple with a worsening slump in real estate, weak consumer spending, and a slowdown in credit growth that has led analysts to downgrade growth forecasts for this year.

• S&P 500 (F)(US500) 4,465.48 −31.35 (−0.70%)
• Dow Jones (US30) 34,443.19 −198.78 (−0.57%)
• DAX (DE40)  15,771.71 −53.14 (−0.34%)
• FTSE 100 (UK100) 7,426.14 −11.79 (−0.16%)
• USD Index  104.85 +0.04 (+0.04%)
   

Important events for today:

• Australia Trade Balance (m/m) at 04:30 (GMT+3);
• China Trade Balance (m/m) at 06:00 (GMT+3);
• Australia RBA Governor Lowe Speaks at 06:10 (GMT+3);
• Switzerland Unemployment Rate (m/m) at 08:45 (GMT+3);
• German Industrial Production (m/m) at 09:00 (GMT+3);
• Eurozone GDP (m/m) at 12:00 (GMT+3);
• US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
• Canada Building Permits (m/m) at 15:30 (GMT+3);
• Canada Ivey PMI (m/m) at 17:00 (GMT+3);
• US FOMC Member Harker Speaks (m/m) at 17:00 (GMT+3);
• US Natural Gas Storage (w/w) at 17:30 (GMT+3);

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