US Markets Smashed as Data Falls – Nasdaq Down 2%
US stocks took a significant hit in trading on Friday as data once again increased investor concerns in the world’s biggest economy. All three major stock indices fell sharply on the day, with the S&P recording its biggest loss since mid-December by falling 1.71%, the Dow by 1.69%, and the Nasdaq by 2.20%. US Treasury yields also declined sharply after Services PMI figures came in well below expectations – the two‐year yield dropped by 7.6 basis points to 4.198%, and the ten‐year by 8.3 basis points to 4.431%. The dollar edged higher on the day as its haven status counteracted the immediate knee-jerk reaction, with the DXY closing up 0.1% at 106.61. Oil prices also fell considerably as investors priced in a more peaceful environment in the Middle East and increased US stockpiles, with Brent dropping 2.7% to $74.49 and WTI falling 3.1% to $70.38 a barrel, whilst gold had a relatively quiet day, declining just 0.1% to $2,936.38.
Dollar Poised for Big Moves Ahead This Week
The US dollar had a relatively quiet day on Friday, while other financial products experienced significant moves as it found itself caught between the ‘rock’ of poor data and the ‘hard place’ of haven flows. However, FX traders do not expect this situation to last long – and we have already seen decent moves on the Asian open this morning – as they believe we could be in for some good trending markets over the next few weeks. US Treasury yields took a hit on Friday, and it is unusual to see the dollar remain resilient given the magnitude of the moves in bonds. Consequently, traders feel there may be some catch-up later in the day when the US market opens. We have seen a good move in USD/JPY over the past week as it broke into fresh downside ranges, and traders are now looking to some of its contemporaries for similar moves. The euro will probably be at the top of the list given the potential stemming from the German election, but significant inflation data due later in the week could cause some of the other majors to breach technical levels and move sharply.
Quiet Calendar Day to Start the Week
The macroeconomic calendar appears rather sparse as the first trading day of the week begins. However, after substantial moves in New York on Friday and further geopolitical updates over the weekend, the next three sessions could be anything but quiet. We have already seen some gapping in the euro on the Asian open following a government change in Germany, and further updates from Europe’s largest economy are likely to result in more moves for the currency in the sessions ahead. Asian markets are set to open on the back foot today after the significant drops on Wall Street, and investors are hoping for some positive news to slow the momentum. However, with little on the event calendar throughout the trading day, any such update will have to come from the newswires rather than underlying economic fundamentals.
