On Friday, Wall Street closed feeling warm and fuzzy after the Dow Jones Industrial Average (DJIA) rallied 654 points for the week. This mornings open, however, was cold and frosty – and it had nothing to do with the weather.
The DJIA, S&P 500 and NASDAQ opened in negative territory. Traders were unhappy with the global equity market's reaction to yesterday’s IMF World Economic Outlook that said the “the risks to global growth tilt to the downside.”
Soundbites from Davos didn’t help. Bridgewater founder Ray Dalio chirped that limitations to monetary and social and political antagonism make him worried about the next downturn. Recent equity market volatility and a lack of top-tier US economic data grated on traders’ nerves as well. Remarks by China President Xi Jinping overnight, warning senior Chinese officials to be vigilant against “black swan” events, only added to the unease.
The FX price action in New York has been mixed. EURUSD has inched lower as GBPUSD edged higher. AUDUSD and NZDUSD recovered some of their overnight losses while USDJPY is weighed down by a 1.22% dip in 10-year US Treasury yields. GBPUSD may be benefitting from the what-ifs, specifically: what if a “no-deal” Brexit can be avoided? However, the rally is merely a correction as long as the daily downtrend line from May 2018, currently sitting at 1.3030, remains intact.
USDCAD rallied in concert with weak domestic data and free-falling oil prices. Canadian Manufacturing Shipments dropped 1.4$ in November while Wholesale Sales fell 1.0%. The declines were slightly worse than expected and due to a steep drop in crude shipments.
WTI oil prices have fallen 4.4% since yesterday’s $54.23/barrel peak. Traders were spooked by the IMF global growth concerns and an earlier report that Saudi Arabian oil exports rose by 534,000 barrels/day in November. Also, an International Energy Agency director warned that the full impact of the US shale production hasn’t hit markets.