Stock Markets Hit after Stronger Retail Sales – Nasdaq down 0.6%
US Stock markets had another drop in trading yesterday as a strong Retail Sales print further pulled back market expectations on rate cuts in the states. The Dow Jones dropped 0.25%, the S&P 0.56% and the Nasdaq finished 0.59% in the red. US treasury yields reacted strongly with the rate sensitive 2-year gaining 13 basis points to trade back up to 4.35% and the benchmark 10-year adding 4 basis points, back up to 4.1%. The dollar ground higher again to touch a 1-month high, although Cable had a whippy day after the original dollar strength was reversed when UK CPI data came in stronger than expected. Oil had a relatively steady day, but Gold took another hit on the back of the dollar strength, now trading down at $2,005 an ounce.
Dollar Marching Higher Again
The dollar has managed to grab back the limelight over the past few weeks trading after taking a significant hit into the end of 2023. This move of course came on the back of a more dovish Fed meeting in December and despite some warning, the market took the ball and ran with it, the greenback losing nearly 5% against the Yen and 4% against the Euro. US treasury yields were smashed and expectations for a March rate cut soared. But the new year has brought some fresh perspective to the market, the dollar has gradually gained back its lost ground – helped by resilient data like last night’s Retail Sales – and swap pricing has dramatically shifted, with chances of a cut in March now trading around 55%, down from 80% on Friday. With some of the majors trading near key technical levels some traders are looking for much more dollar upside if we break into fresh ranges over the next few sessions.
Risk-Off Momentum to Start the Trading Day
Traders are expecting the market to start off on the back foot after another risk-off day in US markets yesterday. The Asian session however has the main scheduled data release of the day and attention will be firmly fixed on Australian markets as the latest employment data is due out early in the day. There is no data scheduled in the European session today although we are set to hear from the Swiss National Banks Thomas Jordan in Davos which could result in some volatility in the franc. The US session see’s the usual release of weekly unemployment claims before attention moves back to Davos and we hear from the ECB’s Christine LaGarde.
