Despite the very strong December NFP coming in at 312K (vs 184K expected) on Friday, the US$ finished lower and stocks ended as much as 3.5%/4.25% higher, mainly due to some dovish comments from the Fed Chair, Jerome Powell, who suggested that the Fed could change course on monetary policy, significantly if required, should the need arise. Speaking at a forum with Janet Yellen and Ben Bernanke, he said that the Fed would be sensitive to the downside risks that the market is pricing in, and pledged that the Fed would be patient to see how the economy evolves. Risk assets received a big boost, with stock markets soaring and with the Aud and the Nzd in particular enjoying the ride higher. While the Euro and Chf remained within their recent range, Sterling rallied strongly too, and after having fallen to its lowest since April 2017 on Thursday (1.2425) over the worries about the health of the global economy, it climbed strongly on Friday, to reach a high of 1.2745 after a survey showed Britain’s dominant services sector rose slightly more than forecast. Uncertainty about Brexit kept further gains in check as traders begin to prepare for a No-deal Brexit.
In other markets, WTI rose as much as 4% at one stage, in line with the stock market rally, but came off its highs and settled up 2% at the end of the session. Gold was down 0.75%. The US10Y yield ended at 2.67%.
In terms of the US Jobs data, the NFP rose by 312k versus expectation of 178k in December, the highest level since February 2018, while the previous month’s figure was revised up from 155k to 176k. The headline unemployment rate rose to 3.9%, up from 3.7%, mainly due to surge in participation rate from 62.9% to 63.1%. Average hourly earnings rose 0.4% mm, above expectation of 0.3% mm.
The data flow will be steady throughout the coming week although much of it will be secondary, The key focus will be on the FOMC Minutes, due Wednesday and then the US CPI, Friday, where dovishness in either/both of these could see the beginning of a selloff in the US$. We shall have to wait and see. In the meantime, there is plenty out of Europe today, which has issues of its own on the growth front, not to mention Brexit/Italy, with the data to include the Sentix and the German/EU Retail Sales. Tuesday sees the Australian Trade Balance and further secondary EU data, while Wednesday will feature the FOMC Minutes as well as an Interest Rate Decision by the Bank of Canada; No change expected. Thursday will look to the China CPI/PPI and the US housing data, while the week will wind up with the Australian Retail Sales, the German/EU ZEW Economic Sentiment Survey and then the US CPI, along with the monthly Business Inventories/and Michigan Consumer Sentiment Index. Have a good week.
Economic data highlights will include:
Mon: AIG Performance of Mfg Index, German Retail Sales, Factory Orders, EU Sentix Investor Confidence Survey, EU Retail Sales, US ISM Non -Mfg PMI, Factory Orders, Fed Bostic Speech
Tue: Australian ANZ Job Ads, Trade Balance, Swiss Unemployment, Retail Sales, German Industrial Production, EU Economic Sentiment Indicator, Industrial Confidence, Services Sentiment, Business Climate, Consumer Confidence , US NFIB Business Optimism Index, Trade Balance, Consumer Credit , JOLTS
Wed: NZ ANZ Job Ads Commodity Prices, Building Permits, German Trade Balance, Current Account, Swiss CPI, EU Unemployment, UK NIESR GDP Estimate, BOC Interest Rate Decision, EIA Crude Oil Stocks Weekly Change, Fed Speech; Rosengren, FOMC Minutes,
Thur: UK Like-for-Like Retail Sales, China CPI, PPI, New Loans, Japan Coincident Index, Leading Economic Index, US New Home Sales, Wholesale Inventories, Jobless Claims, API Weekly Crude Oil Stock Inventory
Fri: NZ Building Permits, Australian AIG Performance of Construction Index, Retail Sales, Japan Eco Watchers Survey, UK Manufacturing/Industrial Production, Trade Balance, Goods Trade Balance, GDP, German/EU ZEW Economic Sentiment Survey, US CPI, Business Inventories, Monthly Budget Statement, Michigan Consumer Sentiment Index
|INDICES / COMMODITIES|