Axi | Feb 15, 2018 09:50
Originally published by AxiTrader h2 Market Summary (7.46 am)/h2
I’m not going to pretend I have a clue this morning.
CPI was higher than expected, both in the monthly core (+0.3%) and headline (+0.5%)rates, US 10's are at 2.91%, the 2's are at 2.17%, the curve is thus at 74 points. But stocks have surged and the US dollar has been pole axed. That’s even though the market expectations of a March hike increased to 83%, June to 57%, and then a third in September to 36%.
Oh and apparently according to some dude from CNN even though CPI shot the lights out with a 0.5% print for January and 2.1% yoy it simply “confirmed” it didn’t surprise. Ahem, Mr ex-poste. If prices had have stayed where they were shortly after the release we’d have a very different narrative.
Now, don’t tell me this is all about the miss on retail sales, though it was a big miss I’ll grant you (-0.3%). Because if it is about retail sales then why are stocks excited by the prospect of higher rates and a slowing economy. That doesn’t exactly sound like a recipe for a surging stock markets. But I guess JP Morgan’s forecast of 2.5% and the Atlanta Fed’s GDPNow guesstimate of 3.2% aren’t exactly weak.
Anyway, so the wash up is the S&P 500 is up 1.35%, the Dow has risen 1.08%, and the Nasdaq has fairly soared 1.87%. All that money that rushed out of stock funds last week must have rushed back in. Although the volume data I’m looking at as I write says that’s not the case. At least on the S&P.
European stocks were higher as well with the rally starting while they were open and with reasonable data from Europe itself. At the close the DAX was up 1.2%, the CAC was 1.1% higher, while the FTSE was 0.64%.
Naturally after a disappointing day on the ASX yesterday SPI traders are betting on a very solid day here in Australia adding 45 points to 5,835. They're probably right if FOMO is back and we are melting up again.
Nothing to see here move along sell dollars and buy stocks. Bonds be damned!
One day, one swallow, does not a summer make. But last night’s price action is instructive across a raft of asset markets. Is the new paradigm that bonds don’t matter now when they did just last week? Give me a break. This Facebook (NASDAQ:FB), Instagram, Snapchat instant gratification world is doing weird things to investors' heads.
Price action wise I get it though. The S&P 500, euro, Aussie and many other assets hit really important levels before reversing from around 4-5am my time Saturday morning. Indeed all these assets were lower in the aftermath of the CPI. But then they reversed – perhaps the best explanation is bonds didn’t tank.
Fundamentally though, nothing matters, until it does. Keep that in mind with bonds folks.
Anyway.
On Forex markets the dollar has been absolutely punished in the past 6 hours since the data was released. Actually the initial reaction of traders was to buy US dollar but that was swiftly reversed. With the euro trading from 1.2275 up to 1.2453 now for a gain of 0.84%. Sterling has made a similar move and is at 1.400, while the yen is slipping under 107 again now. Of course the Aussie has gone along for the ride given this is generalised US dollar weakness – it’s up 0.87% at 0.7927 as we wait for employment data today.
Proof though that this is all a lower volume bang for your buck move though might come from the moves in the kiwi (+1.32%), Korean won (+1.28%), and Brazilian real (+2.35%). All are smaller, less liquid versions of the same trade as the Aussie but have outperformed.
On commodity markets, everyone loves a lower US dollar. Copper is through the roof with another big lift rising 2.2% overnight to follow the previous days 2.45% rally. Aluminium, Nickel, Lead, Zinc, and Tin were all higher too. Iron ore is similarly buoyant and gold has shaken off the bond rise, focussed on a weaker US dollar and some say rising inflation (its long held source of value as a financial asset) and XAU/USD is up 1.85% at $1354 as a result. Oil is also higher on lower than expected EIA build in inventory and some more soothing words from the Saudi’s. WTI and Brent have gained 2.62% and 2.74% respectively.
On the day today we get Australian employment data for January with the market looking for the standard 15,000 new jobs and an unemployment rate of 5.5%. Tonight it’s jobless claims, NY Empire and Philly Fed manufacturing indexes along with PPI, industrial production and the NAHB housing market index in the US.
h2 Here's What I Picked Up (with a little more detail and a few charts)/h2 h2 International/h2h2 Australia/h2
h2 Forex/h2
Have a great day's trading.
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