Markets Steady After Conflicting Data
Global markets are set to open the trading week in a muted fashion after conflicting data out of the US let to minor gains for the US stocks on Friday. Employment data came out much better than expected, with non-Farms posting an increase of 216k and the unemployment rate sticking at 3.7%, however later in the day the ISM Service PMI data was much lower than expected. All three of the major indices closed slightly higher on the day, the Dow up just 0.07%, the Nasdaq 0.09% and the S&P 0.18% in the black. US treasury yields had a whippy day, rising strongly after the initial data and falling back down, but still registering wins, the 10-year closing up 6 basis points at 4.05% and the 2-year finishing slightly higher at 4.39%.
Fed Expectations to Continue to Swing as the Month Progresses
It was a disappointing start to the trading year for many investors last week. Many had been calling for a continuation of the strong bull run that the equity market had seen in December to continue and key to that were expectations of Federal Reserve Bank cuts throughout the year. However, recent data and warnings from Fed members have led to a bit of consolidation in markets in the last week and Friday’s data prints in the US pointed to more swings ahead as a stronger NFP print was swiftly contradicted by a much worse than expected result in the ISM Services PMI data. Bets are running at 65% that we will see a cut in March from the Fed but if we do continue to see a resilient US economy in data terms over the next few weeks, then expect that number to fall further. Next up this week is the key CPI number on Thursday.
Tepid Start to the Week for Traders
It has been a quiet start to the week for traders in the Asian time zone as contradicting data in the US failed to give any momentum into the weeks opening session this morning. Japanese markets are on holiday which adds to the rangebound conditions and removes some of the usual liquidity and there is little on the event calendar until Europe opens. Focus will be on Switzerland once trading starts in the northern hemisphere with the release of key CPI data due out early in the day. There is nothing of note in terms of data releases in the US session although investors will be looking at what FOMC member Raphael Bostic has to say later in the day with the market closely looking for confirmation of coming rate cuts.
