US Dollar extends correction with China reopening

LONDON (October 8) The US Dollar (USD) eases for a second day in a row with investors welcoming China back to the markets. It is not a warm welcome, with the Chinese Hang Seng 300 Index down over 9% at its closing bell. A surge in risk-off is taking place, with European stocks on the backfoot as well. 

The economic calendar is light and should not create big waves on Tuesday, with the Goods Trade Balance and the Economic Optimism Index not expected to be market movers. Comments from Federal Reserve Bank of Atlanta President Raphael Bostic and Federal Reserve Vice Chair Phillip Jefferson, however, could be. 

Daily digest market movers: Hangover mode for China

• China has reopened again after a week of festivities for the Golden Week. The festive mode has rather quickly dampened, with the Hang Seng Index correcting near 10% at its closing bell. The negative reaction spilled over into European markets and some risk-off across the board. 
• At 10:00 GMT, the National Federation of Independent Business (NFIB) released its Business Optimism Index for September, which raised to 91.5 from 91.2 in August, falling short of economist expectations of 91.7. 
• The Goods and Services Trade Balance data from August is expected to be released at 12:30 GMT. The Goods and Services Trade Balance should see a smaller deficit of $-70.4 billion compared to the wider $-78.8 billion in July. The Trade Balance excluding Services showed previously a deficit of $-94.3 billion, with no forecast available. 
• The TechnoMetrica Institute of Policy and Politics will release at 14:00 GMT the Economic Optimism Index for October. A small uptick to 47.2 is expected, coming from 46.1, though indicating ongoing consumer pessimism. 
• At 16:45 GMT, Federal Reserve Bank of Atlanta President Raphael Bostic (2024 FOMC voting member) speaks about the US economic outlook at the Atlanta Consular Corps luncheon. At 22:30 GMT, Federal Reserve Vice Chair Phillip Jefferson (2024 FOMC voting member) delivers a speech at an event organized by the Davidson College in Davidson, North Carolina.
• As mentioned above, European equities are being infected with a negative tone coming from China. All European indices are down by 1%. US Futures are still looking for direction ahead of the US opening bell. 
• The CME Fedwatch Tool shows an 88.7% chance of a 25 basis point (bps) interest rate cut at the next Fed meeting on November 7, while 11.3% is pricing in no rate cut. Chances for a 50 bps rate cut have been fully priced out now. 
• The US 10-year benchmark rate trades at 4.00%, the highest level since mid-August. 

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