Welcome to my daily Markets Musings.
You’ll see things are different from now on. That’s because the full note was approaching 2,000 words some days and I’m breaking it up into a number of reports on the Axi Blog each day now.
That way traders can subscribe to the Axi Blog easily and then cherry pick the yarns and markets of interest
Feedback always welcome
Market Summary (7.38 am Monday, August 6)
US non-farms undershot expectations with a headline print of 157,000 Friday. Unemployment was as expected at 3.9% and hourly earnings rose 0.3% to a 2.7% year on year rate.
That combination was a little bit of a Goldilocks result for US markets – headline at least anyway, traders ignored the addbacks which took the number north of 200,000 - because it allowed 2’s and 10’s to ease a little to 2.65% and 2.95% respectively, while the curve sits at 30 points. That, in turn, helped stocks end the week higher Friday with the S&P 500 up 0.46% at 2,840. The Dow rose 0.54% to 25,462, while the Nasdaq 100 finished at 7,395 – up 0.32%.
That positivity was despite China hitting back with $60 billion worth of tariffs on US goods Friday night my time. Maybe Larry Kudlow’s suggestion China is a bad investment, and the Chinese shouldn’t underestimate President Trump gave traders comfort he’ll win this battle. IDK.
In Europe stocks were a little higher too on some reasonable earnings. The FTSE 100 in London rose 1.1%, the DAX was 0.55% higher and the CAC gained 0.33%. And of course a little bit of positivity on Friday has encouraged the bulls on the SPI to add 21 points to the small fall on the ASX Friday. The SPI is still clinging to its trendline and 6200.
On currency markets the release of the non-farms was a range reinforcer I tweeted at the time and I retain that view for the moment. Indeed the fall in the ISM non-manufacturing to 55.7 from 59 and the bigger than expected US trade deficit ($46.3 bilion) have knocked the CESI for the US down to -15 and seen both the Atlanta and New York Fed’s downgrade their very early calls on Q3 GDP to 4.4% (from 5%) and 2.58% (from 2.83%) on Friday.
But the Euro’s close at 1.1566 (it’s at 1.1571 this morning) was on the weaker side of the ledger after it tried and failed post-NFP to get back inside the wedge (within the range) it broke out of with Thursday, 1.1490 is the big level to watch. Unless or until that gives way Euro, and the USD is in a range. And with the weaker CESI score and a market long of USD’s that’s the most likely short term scenario.
Elsewhere on Forex markets the Yen gained ground with USDJPY at 111.21 this morning, while GBPUSD is at 1.3007 after testing near the recent range lows Friday after Mark Carney said the chance of a no-deal Brexit risk is rising. Central banking 2018 is more art than it’s ever been it seems. On the commodity bloc the Aussie is back up near 74 cents helped a little by copper’s recovery – it’s at 0.7396 this morning. The Kiwi is at 0.6740 and USDCAD is at 1.2992.
On commodity markets it could be interesting today after weekend news that the Saudis are running tankers through the Red Sea shipping lane of Bab al-Mandeb. Oil was already lower Friday as traders fretted about the escalation of trade war tensions after China announced its $60 billion in tariff retaliation. WTI is at $68.49 while Brent is at $73.71 down 0.7% and 0.3% respectively. Copper rose 1.1% in a broad based industrial metals rally while gold recovered from its lows to $1213.
Bitcoin has collapsed another 5% after rejecting the trendline for the past couple of weeks and after news broke of a forced position liquidation and bail in for losses of other traders at Hong Kong based exchange OKEx.
On the day it’s fairly quiet with ANZ job ads out in Australia and a bank holiday in Sydney before German factory and construction data tonight.
Have a good day.
Macro Stuff that affects everyone and everything – either today or eventually
Have a great day's trading.
Chief Market Strategist
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Ongoing rate curve repricing and risk asset reaction perfectly illustrate how worryingly reliant investors have become on easy money policies