Senior Relationship Manager
Summary: Nonfarm Payroll to decide tug of war
Good Morning
US Indexes had the fourth negative day in a row as yields rose and the Dow lost 0.46%, the S&P 500 1.06% and the Nasdaq 1.73%.
Hopes of a slowing labor market helped yields fall back to 4.1 from 4.2 in the US 10 year and let the USD give up some of it`s earlier stronger gains.
The BoE delivered the expected 75 BPS hike but sounded more dovish than Mr Powell causing the expected rate differential between the USD and the GBP at peak rates to widen and this drove the exchange rate between the two lower by app 2%.
The USD Index rose to above 112, EURUSD is trading at 0.9780, the yen at 147.80, GBPUSD at 1.1230.
Gold and Silver lost strongly yesterday but could recover the losses and are now at 1648 and 19.70.
The Nonfarm Payroll will be the most important data point today at 13:30, expected at a moderate 200k, the lowest in two years. The unemployment rate is seen 0.1% higher at 3.6% and salary increases at a moderate 0.3%.
Before that, German Industrial Orders, French, Italian German EU and UK PMI data will be released.
This morning the market is trying to defy negative implusles, let us see if that holds.
Headlines:
Economic data:
Friday; EU PMI, US Nonfarm Payrolls
Bond. Long Bond(s)
With real rates being too positive, we see three scenarios: Opportunity to lock in rates at cycle high, government overreach to keep the economy afloat or a complete reset of the economy.
Steen Jakobsen,
Chief Investment Officer
Is a bond bull market ahead? Inflation still poses a risk for investors, but the moment for increasing duration to your portfolio may be approaching towards the end of the year, when central banks might be forced to cut interest rates.
Althea Spinozzi,
Senior Fixed Income Strategist
The furious rate hike cycle has brought gains in the US dollar, but with stagflation risks in Europe and the UK and weakness in the Chinese economy, USD may have more room to run. But a strong dollar could also have repercussions for US growth, emerging markets and commodity prices.
Charu Chanana,
Market Strategist
With the cost of capital rising painfully, stagflation fears are back, illuminating the fragile state of the green transformation, while giving a tailwind to nuclear power, and threatening the growth of AI-related stocks.
Peter Garnry,
Head of Equity Strategy
With supply tightness not only in energy but all commodities, the momentum in commodity prices may continue, pressuring central banks to lower real rates. That could be a good setup for precious metals, including gold, silver and potentially platinum as well.
Ole S. Hansen,
Head of Commodity Strategy
As the pandemic showed, even the US Treasury can experience seismic shifts. With the government increasing the pace of issuing bonds to support fiscal spending, the complex Treasury market and regulatory constraints could spark a liquidity event.
Redmond Wong,
Market Strategist
The tide has turned for bonds. Given the current yields, bonds have become an attractive investment, with added benefits including lower risk than stocks, increased diversification and a steady stream of income unaffected by economic changes.
Peter Siks,
Investment Coach