Stocks and Yields Fall After More Poor Data
Both US Stock markets and treasury yields fell yesterday after another lower-than-expected print on jobs numbers. The three main indices all finished the day in the red as investors take a more balanced view on what poorer data means to the economy, the Dow closed down 0.19%, the S&P fell 0.39% and the Nasdaq took the biggest hit finishing 0.58% lower. Yields also fell with expectations of a rate cut in March now running at 60%, the benchmark 10-year yields dropped 5 basis points to hit a low of 4.106% before bouncing slightly to close at 4.119%. The dollar remained resilient with the dollar index climbing another 0.2% and Oil fell again as demand concerns continued to weigh.
Euro Coming into Focus with Rate Cuts in the Air
All the talk in the markets has been on the Fed and the potential for rate cuts increasing state side but the same calls are being made in Europe at the moment and some investors feel the FX traders should be looking a bit harder at the continent for potential long-term interest rate differential trades. While the market is pricing in a 60% chance of a cut from the Fed in March, it has a larger 85% chance priced in for the European Central Bank and there is a good argument that this should be weighing hard on the single currency. We have the FOMC next Wednesday and the ECB the day after and although we are expecting both to hold firm at current levels, the messages could differ in intensity on perspective cuts and that could open the way for more downside potential for the Euro.
Calm Before the Storm for Traders Today
The market event calendar looks a lot quieter today after what has already been a busy week for traders, but most are still looking ahead to tomorrow’s major employment data out in the US and are therefore expecting a bit of consolidation within ranges for the next few sessions. There is only really second tier data due out in Asia, although the Chinese Trade Balance numbers may give some investors pause for thought. The European session will have a similar feel although FX traders as usual will pay close attention to the Swiss foreign Reserves data, especially given the precarious position that EurChf finds itself in at the moment. We do have yet another employment number in the US today in the form of the usual weekly unemployment claims data release, but really the big data will come on Friday and that’s when things could really get interesting.
