- USD & Yields Bid, Stocks sink – Fed Hawk Bullard calls for 300-325 bp rate hikes this year. (3.5% year end rate) EUR & JPY pressured (worries over French election & weak over night data respectively)
- Stocks weak but closed flat for the day (NASDAQ -2.5% for the week so far) – Asian shares mixed & also lower for the week – (NIkkei -3%). European FUTS higher.
- Yields perked up again, 3-day inversion over – with short-dated 2 & 5-yr rising while 30-yr flatter. OIL fell to new 3-week lows before recovering and GOLD ran to resistance before declining.
Jobless claims posted a near record low (back to mid-1960’s levels at 166K), tempered by a change in the maths which calculates seasonality – but still a very strong number and adding to the tight jobs market out look and pressure on wages and therefore inflation. There was also a record $1.8 bln jump in February consumer credit to a new $41.8 bln record & record spike 5 times the tepid $8.9 bln January increase. ECB Minutes were more Hawkish than expected adding to pressure on EUR.
More and heavier weapons being deployed from the West to Ukraine, Shanghai registered 20k new Covid cases as food runs short in lockdown, and worries over new rise of the right as Le Pen again narrows poll difference with Macron.
Overnight – AUD Fin. Stability Review “important borrowers are prepared for increase in interest rates” & “markets globally vulnerable to larger-than-expected rate increases” Japan’s Consumer Confidence missed (32.8 vs 35.3 prior) & Current Account surged to 0.52tln(trillion) Yen from 0.18tln.
- USD (USDIndex 99.46) – rallied to new high 99.87 since May 2020. 100 beckons.
- US Yields 10-yr closed higher again at 2.6520, up again now to 2.6584%.
- Equities – USA500 +19 (0.43%) at 4500. – Recovering key 200-day MA. US500 FUTS 4500. Technology stocks led decline, Consumer Discretionary & Healthcare lead value stocks higher. HQ +14.8% (Buffet invested $4.2bln) TSLA +1%, COST +4%, BABA & FB both -3.17%.
- USOil – Trades at $96.70 following a dip to 93.78, Oil markets have lost over 3% this week due to the release of US reserves.
- Gold – gyrated from $1937 highs to $1922 lows yesterday, before holding at $1930.
- Bitcoin continued to decline from key 45k to trade at 43.4k now.
- FX markets – EURUSD back to test 1.0850 now from 1.0940 yesterday. USDJPY back to test 124.00 and Cable sinks back to 1.3035, as the USD bid continues.
European Open – The German 10-year Bund yield is down -0.9 bp at 0.668%. Stock futures are higher across Europe and the U.S. after a mixed session in Asia. A session without key data releases will leave markets to digest the accelerated tightening schedule in the US and the hawkish ECB minutes, although much has happened since then and the fallout from the Ukraine war will likely mean a more balanced ECB statement next week. Like his colleagues at the BoE, chief economist Lane is already worrying about the impact of waning confidence and if the war drags on and there is no relaxation on the energy front, the risk of a much sharper correction in growth is looming. The EUR continues to struggle in this environment.
Today – Canadian Labour Market Report, ECB’s Panetta.
Biggest FX Mover @ (07:30 GMT) GBPUSD (-0.29%) Spike lower on London open to under 1.3050 new lows this week. Next support 1.30250. MAs aligned lower, MACD signal line & histogram lower & under 0 line, RSI 35 & falling, H1 ATR 0.00098, Daily ATR 0.00825.
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Stuart Cowell
Head Market Analyst
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