Macroeconomic/ geopolitical developments
- When it comes to the Fed and the prospect of further hikes, the focus has been on the path of inflation. However, we have seen in the past week that a surprise softening of labor market data can also move markets.
- The reduction in the job openings and quit rate in the JOLTs data, the moderating ADP employment change and Nonfar Payrolls, rising unemployment and falling average hour earnings have caused aprogressing adjustment in hike expectations. Interest rate futures are no longer pricing for any more hikes and have pulled the first interest rate cuts forward to May 2024 again.
- Major markets are reacting. Despite a rebound on Friday, US Treasury yields still look to be on track for moves lower. The USD rally is being seriously questioned, even if the Dollar Index rebounded on Friday. Metals prices have been rallying, whilst US equity index futures are also in recovery mode.
Global financial market developments
- US index futures have had a strong week in recovery. After a four-week corrective move on the e-mini futures of the S&P 500 and NASDAQ 100 there has been a decisive rebound. The question for the coming week is whether this renewed positive bias holds and any weakness is used as a chance to buy.
- On the e-mini S&P 500 futures a move above 4545 opens the 4634 high again, with initial support in the band 4485/4517. The e-mini NASDAQ 100 futures ideally need to hold a move above the previous resistance band 15324/15442.
- Yields ended the week lower. In the case of the 10-year yield, it was only slightly lower due to a rebound in the wake of the payrolls report. Having initially hit a low of 4.06% the 10-year recovered towards 4.20% again. The 2-year yield closed out the week decisively lower but having dropped to 4.76% there was a late recovery towards 4.90% again.
- Breaking the recovery trend in the US Dollar Index questions whether the market is set for a more choppy phase now. Holding support at 102.94 will be key now.
- Gold futures have picked up well but the uncertain outlook for the USD leaves a question mark over the sustainability of the move. Initial support is at $1911/$1921.
- NYMEX Oil futures have accelerated higher to breach resistance at $84.89. Reaction to a pullback will now determine whether this move is a false breakout. Hodling support between $82.47/$84.89 will be key this week.
Key this week
- Central Bank Watch: The Reserve Bank of Australia (Tue) is not expected to change policy, but there is a slight chance of a hawkish surprise from the Bank of Canada (Wed) which is seen by consensus as also being on hold.
- Macroeconomic data: US ISM Services PMI (Wed) will be the key data for the week. Elsewhere, watch out for Chinese trade data (Thu).
| Date | Key Macroeconomic Events |
| 09/04/2023 | US Labor Day public holiday |
| 09/05/2023 | Reserve Bank of Australia monetary policy, Final Services PMIs for Eurozone & UK, US Factory Orders |
| 09/06/2023 | Australian GDP, Bank of Canada monetary policy; ISM Services PMI, Fed’s Beige Book |
| 09/07/2023 | China’s Trade Balance; US Weekly Jobless Claims |
| 09/08/2023 | Canadian Unemployment |
