Risk aversion recedes – Stocks stabilize but it is all about the Yields and the sharp rise in short-term 2-yr in particular. USD softer again, Oil rallies, Gold & BTC sink again. Key FED hawk Bullard, talked of actual rate hikes as early as March and that inflation will remain over 3% for all of 2022. Claims missed a tad at 207k vs 200k but remain in strong downtrend, but Services PMI’s missed significantly (62 vs. 67 & 69.1 prior). Another Chinese real estate developer (Shimao) missed bond payments.
- USD (USDIndex 96.20) slips but holds gains supported by higher yields – pressuring the commodity complex in particular.
- US Yields 10-yr rocked up AGAIN to close at 1.733% trades at 1.72% now.
- Equities – USA500 -4.53 (-0.10%) at 4696. As value & cyclical stocks gained and growth stocks pressured. USA500 FUTS now 4700.
- USOil – has spiked over $79.00 trades at $79.75 – 3 key drivers – (i) further unrest in Kazakhstan (Govt removed cap on fuel & heating oils on Jan 1 – prices have rocketed & Russia have sent troops! (ii) Supply cuts in Libya & shutdowns in Canada (iii) Tight inventories.
- Gold – down under $1800 again to test support at $1788.
- Bitcoin sinks to test next support at 42,000 now.
- FX markets – EURUSD back to 1.1300, USDJPY under 116.00 at 115.85, Cable back to 1.3545 from 1.3500.
Overnight – JPY data – weaker, German Industrial Production missed
European Open – The March 10-year Bund future is fractionally higher as are US Treasury futures. DAX and FTSE 100 futures are posting gains of 0.04% and 0.16% respectively. Markets are waiting for key U.S. payroll numbers in the afternoon, which will be an important piece in the puzzle for the increasingly hawkish Fed. In Europe the calendar is also pretty busy with trade and production numbers for Germany, consumer spending data for France and preliminary inflation numbers and the latest ESI economic sentiment reading for the Eurozone. Overall the data is likely to support the hawkish camp at the ECB and after Lagarde committed to keep net asset purchases going for most of this year, it will likely become clear that the ECB is falling behind the curve, as Omicron is unlikely to derail the global recovery.
Today – UK Construction PMI, EZ CPI (Flash), Economic Sentiment, US and Canadian Labour Market Reports, Fed’s Barkin, Bostic & Daly.
Biggest FX Mover @ (07:30 GMT) AUDJPY (-1.10%) RISK OFF Fed inspired tank to Sank to 82.90 from 84.34 yesterday. MAs aligned lower, MACD signal line & histogram lower & well below 0 line. RSI 16.06 and significantly OB, H1 ATR 0.1820 Daily ATR 0.8000.
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Stuart Cowell
Head Market Analyst
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