Market sentiment is on the edgy side this Friday amid a slew of risky data points and developments including a key danger zone in the S&P, US average hourly earnings, a ratings downgrade of Turkey and the latest verbal volleys in the China-US trade spat.
"The euro is quite weak as we saw Eurozone CPI not meeting expectations yesterday. We're wondering if that ECB target [inflation below, but close to 2%] will ever come into being before they hit the next recession. But in any case a weaker euro would certainly help and that's what we're seeing," says John J Hardy, Saxo’s head of forex strategy. The 200-day moving average has been in focus and also the 61.8% retracement in eurodollar: "That was the exact low yesterday and we're waiting for the next key US figure to see if this dollar rally can continue to drive higher".
The numbers which the market eagerly awaits are the April nonfarm payrolls stats, particularly the average hourly earnings element, which Hardy expects to come in at a 2.7% gain y-o-y – anything significantly outside this would pose a challenge.
Elsewhere, the S&P 200-day moving average took a downturn yesterday but subsequently reversed into a strong close, preventing, as Hardy puts it "the whole risk-off train from leaving the station completely". Still, "there's an awful lot of suspense around that technical level and whether equities are going to sell off and what the risk appetite picture is".
Another pressure on equities is the state of the China-US trade standoff. "There were rumours of a deterioration in relations but this was denounced overnight with US trade secretary Mnunchin were progressing well in Beijing," says Peter Garnry, Saxo’s head of equity strategy . However, if the negative reaction of Asian equities to this is anything to go by, it looks like the market just didn't believe him.
Finally today, Althea Spinozzi, from Saxo’s bond trading desk , tells us she'll be publishing a trade bond view later today on Alpha Bank 2½, 2023 maturity. [Alpha Bank is the largest Greek bank by market cap.] "We are positive on Greece, we see some signals of a recovery. Unemployment is declining and there are talks regarding ending the bailout programme, so we believe we'll see rating agencies upgrade Greece".
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.