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 (7.45 am Monday September 10)
The jobs report Friday as a little stronger than expected with non-arms rising 201,000 in August with the jobless rate steady at 3.9%. But it was the much stronger than expected average hourly earnings print of 0.4% for the month which saw the US dollar surge and rates rise. That monthly increase lifted the year on year rate to 2.9% - a post GFC high.
There was some interesting elements in the jobs data – like downward revisions to previous months and a different outcome in the Household survey – which do give some reason to ponder the outlook for jobs. But it’s the wages surge which will keep the Fed on track for two more rate hikes in 2018 and then another couple in H1 2019.
That seemed to be the message from Loretta Mester, Robert Kaplan and Eric Rosengren, in the wake of the jobs data, anyway.
So we had the US dollar move pretty much everyone though was coming. The Euro, which had been strangely elevated in European trade at one point despite the dataflow from the region, fell from around 1.1640/50 prior to the jobs data by about 1 cent and is at 1.1550 this morning. Sterling’s also lost about a cent from the highs and is at 1.2931 this morning while USDJPY is back at 111.03.
On the commodity bloc the Aussie had it’s weakest close in about two and a half years and is at 71 cents this morning for its second big weekly fall in a row. The Kiwi is down at 0.6530 and under pressure while USDCAD is at 1.3164 with hopes of a resolution to NAFTA seemingly the only thing between it and 1.33. Comments from US Agriculture Secretary Perdue on Canadian milk are worth noting in that regard.
Naturally rates are a little higher as well with the 2 year Treasury up at 2.707% and the 10’s at 2.942% with the curve at 23.40 points. Folks still seem to think we’ll see a slowdown in the year or so ahead.
Stocks were lower Friday in the US. But that was less about what the jobs data suggests on the path of Fed rates and more about the chances of a trade war escalation. President Trump gave every impression he is coming for China with not only the next $200 billion of tariffs locked and loaded but another $267 billion behind that.
Chinese trade data, and a ballooning record surplus with the US over the weekend won’t have helped. Time to be a little more realistic about this trade war and a little less sanguine methinks traders.
To the price action then and the S&P finished down 0.22% at 2,871 and closing in on the recent uptrend as process roll over – 2,854 is trendline support on the physical. The Dow Jones finished off 0.3% at 25,916 while the Nasdaq finished off the lows but with a loss of 0.3% to close the week at 7,430 – below the uptrend from April.
In Europe the DAX halted its slide with a rise of 0.04% to close at 11,959 – watch 11,700 folks. The CAC rose 0.16% while the FTSE dipped 0.56%. As an aside Brexit looks to be getting increasingly intractable folks. Here at home after a ixed day in Asia – but one where China’s markets climbed off the mat – the ASX was down but off its lows Friday to close at 6,143. SPI traders have knocked 23 points off prices though and September futures sit at 6,108 15 points or so above important support.
On commodity markets gold is at $1195 this morning, copper fell back to close at $2.6035 in HGc1 terms, and oil lifted of the lows as protests in Basra seemed to reinforce the issue of supply disruptions. Brent was up 0.4% to $76.83 while WTI was largely unchanged at $67.75. Bitcoin was off substantially at one point over the weekend but is currently trading at $6,394 down just 0.4%.
Looking at the day ahead we are still waiting on President Trump’s next tranche of tariffs, while we get NZ manufacturing data, Japanese Q2 GDP (final), Chinese inflation and vehicle sales along with a speech - at 1.05 pm AEST - from Michele Bullock, RBA Assistant Governor (Financial System) on “ The Evolution of Household Sector Risks”. That might be worth a read folks given the outlook and falling house prices. Tonight it’s UK Q2 GDP, industrial production, and manufacturing data in an otherwise quiet evening of releases.
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