Here’s the morning market update, where everyone’s watching how the G20 will pan out.
– The G20 meeting has begun in St Petersberg and the frosty handshake between Presidents Obama and Putin speaks volumes for the grey swan risk for markets that could come from a US strike on Syria. It is not a done deal by any stretch of the imagination, but Gold back at $1370 belies the risk that even a limited strike could have in terms of retaliation from so many quarters. Just something for traders to keep an eye on.
– But markets overnight were focused on the Bank of England and the ECB’s commitment to keeping rates low, with the Euro (1.3117) in particular coming under pressure from ECB President Draghi’s commitment to lower rates, falling 0.67% to a low at 1.3109. GBP (1.5587) fell 0.24% and the Yen (USDJPY, 100.13) weakened further above 100.
– For the Australian dollar (0.9129), it has been weakness since the release of the trade data yesterday, which showed an unexpected fall into deficit. But the fact it lost 0.47% – which is roughly around the Yen’s loss and in-between the GBP and Euro – suggests that this is really just a USD move.
– What drove the US dollar was the very strong employment data overnight and I picked up a note from BI US which said that UBS punched their non-farm payrolls (out tonight) guesstimate up to 210,000 from 170,000 after the employment sub index of the ISM data. Elsewhere on the employment front jobless claims fell to 323,000 and the ADP employment figure printed +176,000, all of which is making traders confident tonight’s data will be strong and that the taper is on its way.
– So it won’t be a surprise that US rates markets are rising. 10-year treasuries rose 10 basis points to 3%, German Bunds were similarly up 10 points to 2.04% and Gilts in the UK rose 13 points to 1.83%.
– All of the above combined to take the wind from the stock markets sails as early strength gave way to only marginal gains at the close. The Dow finished up 0.04% at 14937 after an intraday high of 14987. The Nasdaq was up 0.27% and the S&P 500 closed at 1655, up 0.12%. In Europe, stocks had a much better time of it as early strength gave way to weakness and then a grinding recovery across the rest of the day. The FTSE finished up 0.88%, the DAX up 0.39%, the CAC rose 0.67%, the FTSE in Milan was 0.78% higher and stocks in Madrid rose 0.78%.
– On Commodity markets, Gold fell back again by $16 or 1.21% to $1371 oz. Silver fell 0.70%, Copper moved just a cent to $3.24 lb while Crude rose 1.11% to $108.42 Bbl. Soybeans was at it again rising 1.8% while Wheat fell 1.1% and Corn was 0.91% lower.
– On the data front, the biggest number each month is non-farm payrolls and with Taper Talk in the air its even more important. So the release tonight is eagerly anticipated by markets. Prior to that though, we will get a bunch of Trade and IP data out of Germany, France and the UK, so Friday night is going to be an interesting one.
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