Axi | Mar 12, 2018 09:16
Originally published by AxiTrader h2 Market Summary/h2
Goldilocks.
You should give a dollar to your favorite charity for every time you read that in the next day or so – or have already read it over the weekend – with reference to the outsized 313,000 surge in US non-farm payrolls for February was released Friday. That employment growth was strong yet wages ONLY rose 2.6%. That’s the source of the Goldilocks narrative after January’s 2.9% increase in wages proved a one-off.
As a result of the solid jobs growth, without inflation, and with the bond market selloff seemingly constrained by an already very short market, stocks in the US surged higher. The S&P 500 was up 1.74% to 2,787, the Dow rose by a similar amount to 25,335 while the Nasdaq HIT A NEW HIGH and closed up 1.93% at 7,101.
Europe had an okay day, mostly finishing in the black. But it will have some catch up to do when things kick off for the week this afternoon my time given the strength of the US move.
SPI traders didn’t miss the US move however and have added a solid 57 points to Friday’s close on the S&P/ASX 200 at 5,963. With copper, base metals, and oil higher there is a decent chance the physical market has a pop up to and possibly through resistance in the 5,990/6,000 region.
One of the key reasons stocks were able to surge was that they were unrestrained by a bond market itself seemingly constrained by a huge net short position. As a result US 10's closed the week at a benign 2.89%, the 2's were at 2.27% and the curve at 63.
And the wash up for forex traders was that the risk/commodity currencies did best. The Aussie dollar surged with stocks to sit at 0.7850 this morning off a low of 0.7775 Friday. The kiwi too bounced and is at 0.7289, while the Candian dollar is also stronger with USD/CAD at 1.2812 and looking like a top is in place on that one in particular.
Elsewhere on Forex markets the euro looks to be struggling a little and is at 1.2316 with an apparent downside bias as 4 Fed rate hikes in 2018 come into view. But don’t tell stock traders. Sterlling is still in a downtrend but lifted Friday and is at 1.3854 this morning, while the yen lost ground after the BoJ meeting, a rise in risk appetite, and a general reduction in the fear trade. USD/JPY is at 106.60.
On commodities the path of least resistance for copper and oil traders was higher after a couple of days pointing in the other direction and as stocks and risk appetite rose. It’s clear short-term traders of crude oil – in particular – got caught short as WTI shot more than 3% higher to close at $62.04 while Brent rose just a smidge under 3% to close at $65.49. What helped both oil and copper is ebullience about the global economy and the apparent lifting of risks around North Korea and seemingly around tariffs and the potential for a trade war. Copper was up close to 2% at $3.14 a pound.
I don’t want to go all Chicken Little but the narrative of Goldilocks seems a bit premature. President Trump directly tweeted against the EU on tariffs over the weekend, China is still girding for a trade battle, 313,000 jobs fairly guarantees the dot plot will reflect 4 hikes after next week’s Fed meeting, and we have a CPI release for the US this week.
Just a note of caution.
On the day it is very quiet.
And on the week you can grab a great primer from Sam Jacobs what is going on with tariffs from CNN . You’ll note in the story that Australia gets an exemption and even Japan is still under pressure because of the trade deficit.
h2 Forex/h2
Wall Street Journal article over the weekend which highlights the difference of opinion over where OPEC and its allies should be targeting crude. It seems the Iranians, fearful of an outsized US shale oil response, are comfortable with prices around $60 a barrel while the Saudi budget needs something closer to $70. Oil Minister Bijan Zanganeh told The Wall Street Journal that, “if the price jumps [to] around $70…it will motivate more production in shale oil in the United States’. That’s not the view of Saudi oil minister Khalid al-Falih who has said many times he’s not worried about getting overwhelmed by shale.
Have a great day's trading.
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