NY Open: Markets underwhelmed by nonfarm payrolls
A soft US jobs report only added to markets' unease today, with both forex and equities moving into risk-off territory following the lacklustre print.
Equities are off, the dollar's ascent has been stopped in its stride and sentiment has turned sour after the EU retaliated to the the Trump tariffs with a raft of levies of its own.
"So another directional change as we went from risk on to risk off. It's unclear what the driver is though as Peter Garnry, out equity strategist, told me yesterday it could be a function of the Daimler profit warning as well as the trade war itself," says John J Hardy, Saxo's Head of Forex Strategy.
Furthermore, two central bank meetings yesterday saw a hawkish tilt with Norges Bank pointing to a September hike and Bank of England upgrades increasing the possibility of a UK hike in August, Hardy adds. This suggests that the central bank convergence theme is back in play. "But we have our eyes out and we're open minded as to whether the dollar momentum has just hit the wall," he concludes.
Meanwhile it's been a troubled week for commodities as we've seen the dollar continue to strength until yesterday, reports Ole Hansen, Saxo's Head of Commodity Strategy. "Much of the commodity weakness was due to dollar strength, except in metals whose weakness came from trade fears," he says.
But today's big focus, of course, is the Opec and non-Opec series of meetings in Vienna, which kick off today. "The Opec members had a technical meeting yesterday and it seems like they are looking at a production rise, without the support of Iran and Venezuela. They're not changing the output ceiling, the cap will still be in place, but what they're doing is sharing out the lost output from Venezuelan production. The market is taking this positively but with the caveat that we don't know what they'll do and whether Venezuela will veto the deal," Hansen says.
Note that the closed meeting starts at 11:00 CET and a press conference is scheduled for 13:00 CET.