Stock markets rallied again yesterday (Nasdaq +3.41%) to close a volatile month. Four Fed speakers all talked of March lift-off. RBA – rates unchanged (0.10%), announced an end to asset purchases (Feb 10), but maintained a dovish tone. Asia markets flat in thin trading, USD & Yields weaker, Oil holds a bid and Gold lifts to $1800. UK’s Johnson PM survived again, spoke with Putin last night & visits Kiev today, Biden offered talks with NK.
RBA left rates unchanged, & ends bond buying. The bank stuck to the view that inflation will be “transitory”, with higher than expected inflation in Q4 and lower unemployment not prompting a change in stance as the bank still seems to see limited risks of second round effects amid a subdued outlook for a pick up in wage growth. Rate hike expectations have been pushed back in the wake of the announcement, as the RBA promised it would remain “patient” as it monitors inflation, thus sending a clear signal that the bank won’t be following the Fed by mapping out a series of rate hikes. AUD weaker.
China, Hong Kong and other markets remained close for the Lunar (Tiger) New Year holidays.
- USD (USDIndex 96.50) slips 60 pts. from close.
- US Yields 10-yr closed at 1.782% & trades at 1.78%.
- Equities – USA500 +83 (+1.89%) 4515 – (TSLA +10.68%) USA500 FUTS slip 4504.
- USOil – Spiked below $85.00 yesterday, back to $86.46
- Gold – rallied form key $1788 support to $1804 now.
- Bitcoin remains under $40,000 back to test $38,400,
- FX markets – EURUSD up to 1.1240 USDJPY down to test 115.00 & Cable bholds over 1.3450 at 1.3465.
Overnight – Good Japanese data – Unemployment down to 2.7% & Manu. PMI 55.4 (8 yr. high) vs 54.6. German Retail Sales plunges -5.5% vs. -1.3 & 0.6% last time
European Open – The German 10-year Bund yield is down -0.7 bp at 0.000%, Italian 10-year rates have corrected -1.2 bp to 1.35%. DAX and FTSE 100 futures are posting gains of 1.1% and 0.7% respectively, after markets already managed to move higher yesterday. US futures are mixed though, with the NASDAQ outperforming. The German 10-year finally managed to close in positive territory yesterday and while this morning’s numbers may owe something to the much weaker than expected German retail sales data, we don’t think that will break the uptrend yields, as it merely flashes out the -0.7% q/q GDP report for Q4 and doesn’t change the overall picture significantly. German labour market data – released later today – is expected to confirm ongoing improvement and German PMI reports and consumer confidence already suggested that the country will bounce back quickly from Omicron. The final Eurozone manufacturing PMI meanwhile is likely to confirm the deceleration in the pace of expansion signalled by preliminary reports. The UK reading is also not expected to bring major revisions.
Markets are positioned for another rate hike from the BoE on Thursday and with latest inflation data today suggesting that the ECB will once again have to revised its inflation projections higher, we see the ECB turning more hawkish at least, although the central bank remains committed to ongoing net asset purchases.
Today – EZ, UK, US Manu. PMIs, EZ Unemployment, US ISM Manu. PMI, Earnings from Alphabet, Exxon Mobil, EA, AMD, PayPal, General Motors and UBS.
Biggest FX Mover @ (07:30 GMT) NZDUSD (+0.43%) Rallied from 3 day fall at 0.6530 to 0.6600 now. MAs aligned higher, MACD signal line & histogram rising over 0 line RSI 64 & rising, Stochs OB zone H1 ATR 0.00115 Daily ATR 0.0060.
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Stuart Cowell
Head Market Analyst
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