Risk aversion recedes – Stocks stabilize but it’s all about the Yields & 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 & 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 US payroll numbers in the afternoon, which will be an important piece of 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 & Canadian Labour Market Reports, Fed’s Barkin, Bostic & Daly.
Biggest FX Mover @ (07:30 GMT) GBPAUD (+0.18%) Rallied from 1.8640 lows on Wednesday to 1.8940 now. MAs aligned higher, MACD signal line & histogram lower but well above 0 line. RSI 73 OB but still rising, H1 ATR 0.00198 Daily ATR 0.01000.
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Stuart Cowell
Head Market Analyst
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