Dollar powers to 29-month high, stocks stay standing despite weak data

[October 01, 2019]  By Marc Jones

LONDON (Reuters) - The dollar bulldozed almost everything in its path on its way to a 29-month high on Tuesday, as a blizzard of soft global data left the U.S. economy as the only one still looking in reasonable health.

European stocks and the euro both suffered shaky starts as euro zone manufacturing data showed the sharpest contraction in almost seven years, but it was by no means the only alarm bell ringing.

Australia's dollar <AUD=D4> had tumbled overnight after its central bank cut interest rates in its trade war-hit economy for the third time this year. That in turn dragged the neighboring Kiwi dollar <NZD=D4> to a 4-year low.

"On we go with the dollar," said Societe Generale strategist Kit Juckes. "It is the pick of the major economies and I don't think anything is going to change (for the dollar) until the economy slows."

"If you are very sensitive to global trade and sensitive to manufacturing you are having a very tough time of it at the moment, there is no doubt about it."

The dollar index against a basket of major currencies rose 0.2% to 99.585, its highest level since May 2017.
 

Bond markets were also grumbling after a weak auction of Japanese government debt underscored the lack of enthusiasm for the negative interest rates that more and more countries will be heading toward if economies and inflation stay weak.

That worry fed across to higher bond yields across major markets, with 10-year German, French and Spanish and U.S Treasury yields all up 2 to 4 basis points.

Economic surprise indexes published by Citigroup for the United States and Europe showed an increased divergence. The former is at its highest in nearly two years; the latter has fallen to a 2019 low.

HOT CHIPS

It wasn't all gloomy though. In Asia, the world's largest contract chipmaker TSMC <2330.TW> of Taiwan jumped 2.9% to hit an all-time high.

MSCI's broadest index of Asia-Pacific shares outside Japan had inched up 0.23% while Japan's Nikkei <.N225> rose 0.6% and Australia's benchmark <.AXJO> by 0.8%, some of that coming after the central bank rate cut.

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, September 30, 2019. REUTERS/Staff/File Photo

White House trade adviser Peter Navarro had also dismissed reports on Monday that the Trump administration was considering delisting Chinese companies from U.S. stock exchanges as "fake news"

"Whether it was a fake news or not, it is becoming harder to know exactly what the U.S. administration will be doing," said Takashi Hiroki, chief strategist at Monex Securities.

China and the United States are due to resume high-level trade talks next week in Washington.

Back in the currency market, the euro traded at $1.0888 <EUR=>, having slipped to a near 2 1/2-year low.

The yen was slightly weaker at 108.24 yen to the dollar <JPY=>, not far from last month's low of 108.48 too.

Gold also fell to a two-month low as the stronger greenback took its toll on metals markets, It was last trading at $1,468.50 per ounce.

Oil prices rebounded, however, after data showed production at the world's largest oil producers fell in the third quarter. It also came after a sizeable 8% drop over the last few months.

U.S. West Texas Intermediate (WTI) crude rose 1.2% on to $54.28 per barrel after falling 3.3% on Monday. Brent was up 1% at just under $60 a barrel.

"Any rallies, though, are likely to be met with plenty of sellers as a slowing global economy and the recovery of Saudi production outweigh any Middle East risk factors for now," Jeffrey Halley, a senior market analyst for Asia Pacific at OANDA in Singapore, said.

(Additional reporting by Florence Tan in Singapore; Editing by Kim Coghill)

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