Forexlive Americas FX new wrap: Robust job gains and dovish Powell send stocks higher and the dollar lower
Forex news for NY trading on January 4, 2018
- Huge day for stocks as jobs and Powell ignite a rebound
- The Canadian dollar kicks off the year as the top performer
- US Supreme Court to weigh barring challenges to partisan gerrymandering
- Crude oil futures settle the week at $47.96
- Trump said to consider declaring emergency for wall funding - report
- Trump: Hopes US government can re-open in a few days
- Schumer says Trump warned he was prepared to keep gov't closed for years
- Fed's Mester: No signs inflation is going to take off or fall too much
- Fed's Barkin: US faces a slow growth trend
- Baker Hughes oil rig count 877 vs 885 last week
- Canadian jobs data a 'mixed bag' - CIBC
- NY Fed GDP Nowcast comes in little changed at 2.49%
- European equity close: Big gains led by Germany
- Weekly US crude oil inventories +7K vs -3000K expected
- Dollar moves back lower as Powell speaks more dovish
- Fed's Powell Q&A: Wouldn't hesitate to change balance sheet policy if needed
- Fed's Powell: There's a tension between economic data and markets
- WTI crude rises nearly 4% in fourth day of gains
- December US Markit services PMI 54.4 vs 53.4 expected
- Kudlow: 'There's no recession in sight'
- Canada raw material price index for November -11.7%
- December US non-farm payrolls 312K vs 184K expected
- Canada December employment change 9.3K vs 10.0K estimate
- Fed's Mester: I think we're in a good spot with our policy
- The AUD is the strongest and the JPY is the weakest at the start of the NA session
In other markets today:
- Spot gold fell $-9.17 or -0.71% at $1285.13
- WTI crude oil futures rose $1.19 or 2.55% at $48.29. The high for the day extended up to $49.22. That was up nearly 4% on the day, before coming back lower. The inventory data showed a smaller drawdown than expected at 7K vs -3000K expected.
- Bitcoin on Coinbase is closing up $30 and $3825.
In the European and US stock markets today, the major indices all enjoyed solid gains led by the NASDAQ composite index which rose 4.26%. In Europe, the German DAX and the Italian FTSE MIB each rose by 3.37%. Below are the % change ranges and ending % gains for the major indices.
For the 1st week of the calendar year, the major indices did ok as well (sure beat December). Only the Japan Nikkei was negative.
In the US and European debt market, yields shot higher on the back of increased economic optimism following the much better than expected NFP.
The shorter end of the US curve rose the most as the strong jobs data could not be ignored and markets priced in a hike probability.
European yield were also higher on economic optimism spurred from higher stock prices.
The market is now pricing in a 4.7% hike probability by the end of the year. That was a 0.0% earlier this week. The cut probability by December is down to 27.4% from around 40% earlier this week.
The markets today were heavily influenced by a stronger jobs report. Non-farm payroll jobs rose by 312K vs estimates of 184K. As if that wasn't strong enough the prior months were revised up 58K. Wages were also stronger and 0.4% versus 0.3% expected MoM. The YoY rose by 3.2% vs 3.0%. The unemployment rate did take up 3.9% versus 3.7% expected. However, that was on the back of more workers entering the labor force. The participation rate rose to 63.1% from 62.9% last month. Overall it was a strong report.
The dollar rose in response to the report with the EURUSD falling from 1.1384 to a low at 1.1344. The USDJPY rose from 108.08 to a high of 108.58. The stock market, which was already higher on US/China trade hopes, moved even higher (Dow was up about 415 points, the Nasdaq was up 148 points, and the S&P was up about 46 points).
Then came a unique round table with the Fed Chair Powell, joined by ex Fed Chairs Yellen and Bernanke. The market was more concerned with Powell comments. Specifically, it wanted to see if he stepped back comments made in December which discounted the global risk concerns and said the QE taper would be on auto-pilot.
He did end step back by saying in his early comments that "Fed IS listening carefully to the markets risk concerns" and added, "If needed, the Fed would change balance sheet runoff policy". Both of those statements, were step-backs from his December comments.
The dollars rise started to be reversed. The stock market also moved even further to the upside. By the time the roundtable was over, the S&P tacked on 24 points additional points to 2519, the Nasdaq added 90 points to 6701, and the Dow added 217 points to 23318.
In the forex market, the EURUSD rose 53 pips to 1.1407, and the GBPUSD 95 points to 1.2722.
For the rest of the day, that trends continued in the stocks with the S&P ending at 2531, up 84 points. The Nasdaq at 6738, up 275 points, and the Dow at 23433 up 746 points.
In the forex market, the EURUSD stayed steady but near the highs. The GBPUSD did extend, reaching a high of 1.2745 before settling near the 1.2722 level toward the close.
Overall, the markets end with a Goldilocks feeling. Not only is job growth still strong, but the Fed Chair seems to be a little less hawkish and understanding to the global risks.
BUT...not is all rosy
The government remains shut in the US with Trump and the Dems digging in their heels regarding funding for the border wall.
On January 7 and 8th a China delegate will be in Washington to talk about a trade deal. The question of how to solve and police the IP issue and increase trade when the US consumer demands from overseas is not an easy solution. Apples warning that rocked stocks on Thursday is also in the back of traders minds. Is it just Apple, or is it systematic with the environment now led by slower China growth with or without a trade deal.
We may not be totally out of the woods yet (or any time soon).
Have a great weekend.