Stocks Bounce Back to Start the Week – Dow up over 1%
Major US indices bounced for the start of the trading week despite comments from Fed officials that they see the need for interest rates remaining inflated for some time and there may be more on the way. The Dow led the way, finishing the day up 1.16% – its biggest gain for more than seven weeks, the S&P following in its wake, up 0.9% and for once the tech-heavy Nasdaq lagged, closing the day 0.61% in the black. US Treasury yields pushed higher after the comments, but the dollar failed to be as impressed with the major currencies trading in tight ranges.
CPI Data is Key this Week.
There are two major CPI data prints this week and they come from the world’s two largest economies but also come from very different market viewpoints. China’s data is due out tomorrow morning in the Asian session and expectation is for a drop of 0.4% year-on-year and could see Chinese officials once again looking to counter deflationary risks. The shoe is on the other foot for the US, where once again we are expecting to see the year-on-year number above 3% and the month-on-month add another 0.2% which could further add to the hawkish rhetoric we heard overnight from Fed officials. Overall, these divergences, coupled with government and central bank measures are providing good trading opportunities for FX traders and should continue to do so moving forward.
Thin Event Calendar Day Ahead
Traders are expecting rangebound trading conditions ahead today with little on the event calendar to inspire them. There are a couple of tier 2 releases out that investors will be paying attention to, but the real market movers will come in the form of major CPI data releases later in the week. Focus in the Asian session will initially be on Australia where the latest NAB Business Confidence number is released, however, China’s Trade Balance is out later in the day and this has more potential to deliver a greater market impact if it is far off the expected 459 bio print. There is very little out in the European session but once again we have Fed members speaking during the North American time zone and as we saw yesterday, the impact could be significant.
