Yields Rise, Stocks Nudge Higher After U.S. Jobs Data

Yields on the benchmark 10-year U.S. Treasury note climbed above 1.6% for the first time since June, the dollar eased and stocks on Wall Street moved sideways with an upward bent.

The U.S. economy created the fewest jobs in nine months in September amid a drop in hiring at schools and worker shortages, a decline some attributed to mask requirements imposed during the surge of the Delta variant in the summer.

“The headline weakness hides an otherwise much stronger job market than we’re currently seeing,” said Russell Price, chief economist at Ameriprise Financial Services Inc in Troy, Michigan. “It’s related to mandates for vaccinations for the people who may have lost their jobs because of that.”

MSCI’s all-country world index rose 0.14% while the broad STOXX Europe 600 index closed down 0.28%. But European stocks still marked their best week in two months as fears of soaring inflation were tempered.

Gains in oil and auto stocks were outweighed by a 1.4% decline in tech stocks as rising bond yields dimmed the high-growth sector’s appeal, a story that also played out on Wall Street. [US/] [O/R]

The Dow Jones Industrial Average rose 0.25%, the S&P 500 added 0.14% and the Nasdaq Composite slid 0.13%, pulled lower after Wells Fargo cut its price target on Comcast Corp, which tumbled 4.0%.

The September jobs report, which showed the unemployment rate falling to 4.8%, is the last one before Fed policymakers meet Nov. 2-3, when the market expects tapering to begin.

The Fed has made it clear that it does not need a blockbuster jobs report to taper in November, said Kathy Lien, a managing director at BK Asset Management in New York.

“While you’re seeing a little bit of a pullback in the dollar, I think the Fed remains on track,” she said.

The dollar index, which tracks the greenback versus a basket of six currencies, fell 0.158% to 94.023.

The euro was up 0.22% at $1.1575, while the Japanese yen traded up 0.36% at $111.9900.

The sideway market is due to an information vacuum before third-quarter earnings season starts next week, said Thomas Hayes, chairman and managing member of Great Hill Capital LLC.

“The last few weeks there’s some uncertainty with Delta, so the market is really looking forward to estimates,” Hayes said.

A rally on Thursday had lifted

Global stock indexes turned positive for the week after Thurday’s rally despite widespread selling initially as soaring energy prices and the prospect of sooner-than-expected interest rate hikes to combat inflation rattled investors.

The U.S. Senate’s approval of legislation to raise the federal government’s debt limit and avoid a historic default buoyed risk sentiment, though it only put off a decision on a longer-term remedy until early December.

In Asia, the main share benchmark was supported by advances in Chinese blue chips, which rose 1.31% as trading resumed after the week-long National Day holiday. Sentiment improved from a private-sector survey that showed China’s services sector returned to growth in September.

Chinese shares have been battered the past three months by regulatory clamp-downs, turmoil in the property sector related to China Evergrande’s vast debt and recent power shortages. But some investors are starting to see a buying opportunity.

Oil prices rose, gaining more than 4% on the week, as a global energy crunch lifted prices to their highest since 2014 as big global power users struggle to meet demand.

Oil prices rose on Friday to trade up 4% on the week as global energy crunch has boosted prices to their highest since 2014.

Brent crude rose 0.54% to settle at $82.39 a barrel. U.S. crude settled up 1.34% at $79.35 a barrel.

U.S. gold futures settled down 0.1% at $1,757.40 an ounce.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Herbert Lash; additional reporting by Sujata Rao and John McCrank; Editing by Chizu Nomiyama, Kevin Liffey, Dan Grebler and Cynthia Osterman)

Marketmind: Final Quarter Blues

A look at the day ahead from Saikat Chatterjee.

Consider these two opposing pieces of data in the last 24 hours: A frantic summer of merger activity produced deals worth $1.52 trillion in the September quarter, more than any other quarter on record, according to Refinitiv data while fresh evidence of China’s waning economic momentum was again evident with the official PMI data showing factory activity unexpectedly shrinking in September. and

Even as investors struggle to grasp the implications of record corporate profit growth and slowing economies, major central banks remain optimistic about the global economy’s prospects.

As Robert Almeida at MFS Investment Management says the biggest uncertainty facing markets is not the widely expected decline of corporate profitability but the magnitude of the deceleration. Add to that the swirling concerns about the U.S. debt ceiling, the passage of President Joe Biden’s trillion dollar spending packages and the ongoing energy crisis in China and Europe – and the path to the end of the year is strewn with hurdles.

So European stock futures are poised to suffer sharp falls on the first day of the last quarter, with U.S. futures not far behind. U.S. stocks are nursing losses after posting their biggest monthly drop since the pandemic-fuelled selloff in March 2020 and the greenback is set for its biggest weekly rise in more than three months.

With inflation adjusted interest rates in the developed world pushing deeper into negative territory, the dollar’s rise is particularly concerning for emerging markets. Slowing Chinese growth reverberated across the region with factory activity in September shrinking in Malaysia and Vietnam and growing at its slowest rate in seven months in Japan.

Key developments that should provide more direction to markets on Friday:

A U.S. judge said Germany’s Allianz must face investor claims it wrongly “abandoned” the investment strategies it promised to use on hedge funds that suffered massive losses.

British beverage company Diageo said it will invest $500 million to increase its tequila production capacity in Mexico.

Manufacturing PMI: Spain, Germany, France, Eurozone

Debt auctions: UK 1-month to 6-month bill sales

ECB’s Schnabel speaks at New York Fed event

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Saikat Chatterjee; editing by Karin Strohecker)

 

Worries Over Economic Recovery Shake World Stocks, Wall Street

Accommodative central bank policies and optimism about reopening economies have pushed equities to record levels but concerns are growing about the impact of rising coronavirus infections due to the Delta variant.

Markets are also still assessing data from last week which showed the U.S. economy created the fewest jobs in seven months in August, and wondering how the U.S. central bank will respond.

The Fed should move forward with a plan to taper its massive asset purchase programme despite the slowdown in job growth, St. Louis Federal Reserve Bank President James Bullard said in an interview with the Financial Times on Wednesday.

“Everything is tapering, tapering, tapering. We are looking at every single central bank – when is the next one?” said Eddie Cheng, head of international multi-asset portfolio management at Wells Fargo Asset Management, though he added: “The Delta variant impact is still running like a wild card”.

The Dow Jones Industrial Average fell 76.74 points, or 0.22 percent, to 35,023.26, the S&P 500 lost 7.8 points, or 0.17 percent, to 4,512.23 and the Nasdaq Composite dropped 87.96 points, or 0.57 percent, to 15,286.37 by 2:17 p.m. EST (18:17 GMT).

MSCI’s world equity index fell 0.41% by after seven consecutive days of gains.

European stocks fell 1% and hit their lowest in nearly three weeks. Britain’s FTSE 100 struck two-week lows, down 0.75%.

“September is the month investors confront reality,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia, pointing to uncertainty over the Fed’s tapering plans and inflation fears as a reason investors are taking profits or reallocating funds.

The coronavirus Delta variant and concerns over the economic recovery were also weighing.

“What is likely ahead of us is a continued but temporary deceleration of economic activity of one to three months which likely started in August,” said Sebastien Galy, senior macro strategist at Nordea Asset Management.

Federal official Robert Kaplan was due to speak later on Wednesday.

In Europe, markets are focused on whether the European Central Bank will this week begin to scale back its bond purchase programme.

The dollar paired some gains after jumping to a one-week high against a basket of other major currencies. It also hit a one-week peak against the the single currency and was trading at $1.1826.

The dollar’s strength offset investors’ risk aversion to pressure bullion to a two-week low. Spot gold prices fell 0.1%.

Longer-dated U.S. government bond yields slipped on Wednesday coming off a two-day climb after labor market data and ahead of an auction by the Treasury in 10-year notes. Yields on 10-year Treasury notes fell to 1.3495%, retreating from this week’s eight-week highs.

Germany’s 10-year Bund yield also hit eight-week highs before edging lower to -0.32% .

“Fears that central banks might start to taper their asset purchases seems to have knocked away a little confidence, particularly given tomorrow’s ECB decision where many expect we’ll begin to see the start of that process, not least with inflation there running at its highest levels in almost a decade,” Deutsche Bank analysts said in a note.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.77%, stemming an eight-session string of gains.

Chinese blue chips dropped 0.41%, weighed down by recent soft data in the world’s second-biggest economy.

But Japan’s Nikkei jumped 0.89% and hit a five-month high, helped by revised gross domestic product growth figures beating expectations.

Bitcoin continued its rout, down 1.1%.

Shares of Coinbase Global Inc dropped over 2% after the firm revealed it has received a legal notice from the top U.S. markets regulator.

U.S. crude oil jumped 1.39% to $69.32 a barrel and Brent crude rose 1.4% to $72.69 per barrel, with prices supported by a slow restart to production in the Gulf of Mexico after Hurricane Ida hit the region.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Alun John in Hong Kong; Editing by Kenneth Maxwell & Shri Navaratnam, Editing by William Maclean and Nick Tattersall)

World Equities Under Pressure as Economic Worries Mount

Key U.S. equity benchmarks were down and the MSCI world equity index retreated from a record hit overnight, following seven consecutive days of gains to all-time highs. Earlier in the session, hopes of extra stimulus in Japan and strong China trade data had boosted Asia shares.

The Dow Jones Industrial Average fell 209.2 points, or 0.59%, to 35,159.89 and the S&P 500 lost 9.96 points, or 0.22 percent, to 4,525.47 by 2:22 p.m. ET (18:22 GMT). The Nasdaq Composite bucked the trend, adding 0.18% to 15,391.26.

“The combination of exorbitant expectations, nosebleed valuations and slowing macro environment make the go-forward reward/risk outlook less attractive,” said Jeffrey Carbone, managing director at Cornerstone Wealth in Huntersville, North Carolina.

European stocks retraced ahead of an ECB policy meeting on Thursday. The STOXX 600 benchmark fell 0.5% but were not far from last month’s lifetime peak hit.

Data on Friday showed the U.S. economy created 235,000 jobs in August, the fewest in seven months as hiring in the leisure and hospitality sectors stalled, reducing expectations that the Fed will opt for an early tapering of its monthly bond purchases.

The market took the surprisingly soft U.S. payrolls report on Friday “in stride, with the assumption that the COVID-19 Delta variant had an impact on economic activity in August,” Arthur Hogan, chief market strategist at brokerage National Holdings in New York, said in a market note.

Speeches by a number of U.S. policymakers later this week will be closely watched for any indication about how the weak jobs report has impacted the Fed’s plans on tapering its bond purchases and keeping its expansive policy for the near-term.

The recent equity rally started after Fed Chair Jerome Powell’s dovish speech at the Jackson Hole Symposium in August.

“Given that before Jackson Hole many FOMC members had come out in favor of tapering on a tight timetable, we’ll see if they confirm, or align with Powell’s more moderate message,” said Giuseppe Sersale, fund manager at Anthilia.

U.S. government bond yields rose on Tuesday, continuing the climb seen on Friday in the wake of the jobs report and ahead of a fairly busy week of Treasury auctions.

Japanese shares rallied further on hopes the ruling Liberal Democratic Party will offer additional economic stimulus and easily win an upcoming general election after Prime Minister Yoshihide Suga said he would quit.

Tokyo’s Nikkei crossed the 30,000 mark for the first time since April, also helped by an announcement on its reshuffle, and the broader Topix index climbed 1.1% to a 31-year high.

Anthilia’s Sersale said investors had a defensive positioning on Japanese stocks that led to a short squeeze.

“I was positive on Tokyo (stocks) and remain so, but perhaps at this point it is better to look for a less overbought entry point,” he said.

Mainland Chinese shares extended gains, with the Shanghai Composite rising 1.5% to its highest since February, helped by Chinese trade data showing both exports and imports grew much more quickly than expected in August.

“The mood is improving on hopes the government will take measures to support the economy and that the monetary environment will be kept accommodative,” said Wang Shenshen, senior strategist at Mizuho Securities.

A rout in bonds and shares of China Evergrande Group deepened on Tuesday after new credit downgrades on the country’s No. 2 developer.

The euro retreated 0.16% at $1.1849, while Europe’s broad FTSEurofirst 300 index dropped 0.46% to 1,821.56.

The ECB is seen debating a cut in stimulus, with analysts expecting purchases under its Pandemic Emergency Purchase Programme (PEPP) falling, possibly as low as 60 billion euros a month from the current 80 billion euros.

Germany’s 10-year yield hit its highest since mid-July.

The Australian dollar briefly rose after the central bank went ahead with its planned tapering of bond purchases, but quickly gave up those gains after the bank reiterated its need to see sustainably higher inflation to raise interest rates.

The Aussie fell 0.6%, off its 1-1/2-month high set on Friday.

The U.S. dollar rose 0.3% against a basket of other major currencies, pressuring gold prices. Spot bullion prices were down 1.4%. U.S. gold futures settled 1.9% lower at $1,798.5 an ounce.

Elsewhere in commodities, oil prices slid on concerns over weak demand in the United States and Asia. Saudi Arabia’s sharp cuts to crude contract prices for Asia had earlier revived demand concerns.

Brent crude futures fell 1.02% to $71.46 per barrel, while U.S. crude futures declined 1.75% to $68.08.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Chris Prentice in Washington, Danilo Masoni in Milan and Hideyuki Sano in Tokyo; Editing by Jane Merriman, Dan Grebler and Alex Richardson)

Marketmind: Jobs and Japan

That was until Japanese Prime Minister Yoshihide Suga announced he would step down after failing to control the COVID-19 outbreak, setting the stage for a new premier.

And then there’s China data, showing the services sector slumping into sharp contraction in August as restrictions to curb the Delta variant threatened to derail the recovery in the world’s second-biggest economy.

However, change can be a good thing and bad data can spur hopes of more stimulus.

Japanese stocks soared 1.5% to a three-decade peak, as Suga’s departure reduces risks of a big loss for his party at elections later this month.

Equities in Europe and the U.S. look on track to end the week on a high, though Chinese shares slipped almost 1%.

All that optimism has knocked the dollar to one-month lows, and kept a lid on global yields while commodities continued their rebound.

But back to payrolls: the United States is expected to have added 728,000 jobs in August, after weekly data on Thursday showed layoffs at their lowest level in almost a quarter of a century.

Nearly 1.9 million jobs were created in June and July, and economists gradually trimmed their forecasts for August in recent days. Elsewhere though, the day looks thin on data with final PMIs and retail sales due for the euro zone.

On the corporate front, UK homebuilder Berkeley is the latest to flag construction cost inflation due to the usual labour and supply chain bottlenecks

Key developments that should provide more direction to markets on Friday:

Struggling Japan PM Suga steps down

China’s August services activity slumps into contraction

Emerging markets-focused investment firm Ashmore says pre-tax profit rose 28% in H1 ; French investment firm Antin plans IPO

Composite final PMIs

Euro zone retail sales

U.S. non-farm payrolls

Moody’s reviews Spain’s credit rating

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Karin Strohecker)

 

Commodities Up, Dollar Down Ahead of The NFP

Gold tests 1850 USD/oz resistance

Oil breaks the upper line of the flag and aims higher

American Indices keeping close to the all-time highs

European Indices, on the other hand, performing slightly worse

Dollar Index going deeper again

EURUSD continuing a great upswing

EURJPY testing important horizontal resistance. Double top possible

AUDJPY bounces from the neckline to test important horizontal support

USDCAD continues the downswing after breaking crucial horizontal support

For a look at all of today’s economic events, check out our economic calendar.

CHN50 Selling Continues After a Pullback

Chinese index A50 is strongly bearish. We could see multiple rejections after some pullbacks and the price is at the important support.

If we see a pullback towards POC1 or POC2 , new wave of sellers will probably start a fresh wave of selling. The first POC 15170-15215 has a confluence with 50.0 fib while the POC2 15310-15350 makes a confluence with the 88.6 Fib. Additionally, there is also an inner trend line whichs adds for a confluence and a retest of the POC2 offers a very good R:R for swing traders too. Targets are 15008 and 14970.

For a look at all of today’s economic events, check out our economic calendar.

 

Without Trade Deal US Markets Feel Better than Chinese

Interestingly, the Chinese markets failed to maintain a positive mood, quickly returning to a decline on Wednesday morning. China A50 Blue Chip Index lost 0.6% today, declined 4.5% from its local peak levels on November 7. For comparison, the S&P500 rose by 2.5% over the same period.
It seems that fewer traders and investors are making decisions depending on the tone of comments and pay more attention to the economic indicators. And in this case, the strength is on the side of the US. F or export-oriented China industrial production is the primary driver while for the US this is consumer spending. So traders and investors are watching these areas with the most considerable attention. Fresh data from China showed a decline in industrial profits against last year’s levels, which brought back fears of the consequences of trade wars.

The US consumer confidence index published on Tuesday marked the fourth month of decline in a row. However, it remains at very high levels that still can support the economy. More accurate data will be available this afternoon with the release of personal income and outlays statistics in October.
The US and Chinese politicians have consistently argued that the deal is important and hits the opposite side more. However, the markets and facts by now seems on the US side. We may see this both in the more robust stock markets and in the dynamics of the currency. The dollar was rebounding in November, as markets were dumping the soon-to-be-signed “Phase 1”.

The Chinese yuan, however, was losing ground and failed to consolidate below 7.0 per dollar. All this indicates that time is playing against the yuan and in favour of the dollar.

This article was written by FxPro