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Dollar steady as services sector growth hits record high

US stocks ended mostly higher on Wednesday led by technology stocks. The dollar was steady as ICE US Dollar Index, a measure of the dollar’s strength against a basket of six currencies, closed the day little changed from its Tuesday level. S&P 500 finished up 0.3%, the Nasdaq Composite advanced 0.7%. However, the Dow Jones Industrial Average edged lower 0.06 %, weighed by declining energy shares and 9.2% drop in Disney’s shares, the biggest daily drop in seven years. Investors are cautious ahead of the nonfarm payrolls report tomorrow, which will provide more clues on whether the Fed will hike the rates in September or later in the year. The ADP data showed employers added 185 thousand jobs in July, less than the 229 thousand added in June. Stocks advanced after the news as investors interpreted the weak employment report as argument for the rate hike delay. But ADP reports are not good predictor of nonfarm payrolls. Federal Reserve Governor Jerome Powell said he was undecided about whether to support a rate hike when policy makers next meet in mid-September. At the same time, the ISM Non-manufacturing Index increased from 56.0 in June to 60.3 in July, a near-decade high, strengthening the case for a Federal Reserve interest rate hike in September. Today at 13:30 CET initial jobless claims and continuing claims will be released in US. The tentative outlook is negative. At 15:30 CET natural gas storage change will be released by Energy Information Administration.

European stocks advanced on Wednesday on good corporate reports. The euro edged higher against the dollar. The Stoxx Europe 600 rose 1.3%, recording its best close since July 20. European exporters benefited from weaker euro which declined after advancing briefly following weaker-than-expected ADP report. Germany’s DAX 30 advanced 1.6%. European companies are reporting better results than American firms, with 59% of companies on Stoxx Europe 600 index having beaten or met market expectations this quarter. Societe Generale rose 8.8% after reporting better-than-expected earnings. Today at 9:30 CET June industrial and manufacturing production will be released in UK. The tentative outlook is positive. At 12:00 CET Bank of England Interest Rate Decision will be announced. The bank is expected to leave the rate unchanged at 0.5%, with a vote indicating that its policymakers were split over interest rates and leaning toward the first increase in rates in nearly a decade. Tomorrow at 7:00 CET June industrial production, trade balance and current account will be released in Germany. The tentative outlook is positive.

Nikkei rose 0.2% today as the yen fell to a two-month low against the dollar. Investor optimism was limited by declining Chinese markets and caution ahead of tomorrow’s US non-farm payrolls report. Tomorrow at 1:00 CET Monetary Policy Statement will be released by Bank of Japan, and at 4:00 CET Governor Kuroda will give a press conference.

Oil prices are falling today following declines on Wednesday after data showed a larger-than-expected 4.4 million barrels fall in US crude inventories was accompanied by 800 thousand barrels rise in gasoline stocks. The market sentiment is bearish as OPEC and other major oil producers continue to pump at record levels outstripping global demand growth.

Gold prices are extending declines from Wednesday as surprisingly good services PMI report boosted expectations for September interest rate hike.

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