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Yesterday, trade and recession worries were unwanted Halloween visitors, as global equity markets took fright at signs not all is well. A lot depends on the state of the US economic data with both the nonfarm payrolls and manufacturing PMI in focus today.

First, China signalled it is unlikely to be able to strike a meaningful long-term trade deal with Donald Trump. This emerged after signs of renewed tensions over agricultural products. This undid much of the upside from the Fed rate cut and left sentiment not quite in the mood to party.

Then, the Chicago PMI crossed with a terrible number that spooked on the fundamentals. The Chicago PMI printed 43.2, the weakest in four years, and its second straight sub-50 number signalling contraction. Demand collapsed with new orders slipping to 37, the lowest since 2009. The picture it paints is bleak.

US 10yr Treasury notes are back under 1.7%, while bunds are again taking a negative four handle. We’re seeing flattening across the curve as investors trim bets for growth and for the Fed to raise rates. There’s going to be more market pressure to come in the Fed to cut simply to avoid a de facto tightening of conditions.

The S&P 500 was down 0.3% at 3,037.57. The Dow lost 140 points to finish at 27,046. Both finished up for the month of October. The DAX was 43 points lower and the FTSE shed over 1% with Shell (10% of the index) dragging heavily as it slumped 4%. Apple could add any more to its out-of-hours gains and finished $248.76. European markets and US futures are firmer today.

Gold bounced through key levels again as rates fell, the US dollar struggled for bid and trade and growth fears grew. Oil was softer for similar reasons of growth worries.

The dollar is softer still post-Fed as yields retreat. USDJPY has taken a 107 handle after falling hard in the wake of Wednesdays shooting star and failed attempt to clear the 200-day moving average at 109. EURUSD is fairly stable at 1.1160 and GBPUSD holding 1.2960. With rapid balance sheet expansion and probably more cuts to come, dollar softness may be here to stay.

The soft Chicago PMI will only sharpen the focus on today’s ISM manufacturing number due at 3pm (GMT). Last month it sank to a ten-year low – the question is whether that was the nadir or there is more distance to go below. Before that the NFP will deliver volatility, but a soft reading (likely) may be partly ignored because of the GM strike. 90k is expected but it could be softer than that.

Overnight data from China was a relief to markets as the Caixin manufacturing PMI defied the official number to hit its highest in nearly three years. Demand from abroad rose with the first increase in new export orders in five months, possibly because of tariff exemptions and delays. Japan factory activity meanwhile was shown to have slipped to a three-year low. Asian markets split accordingly with China higher and Tokyo lower.

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