Good morning and welcome to 2015’s first 20 Seconds report.
Let’s get busy.
– Non-farm payrolls on Friday was a great number except that it wasn’t. The headline print of 252,000 jobs created in December made 2014 the best year for job creation since 1999. This kicked the unemployment rate to 5.6% at year’s end. But there is some justifiable concern that the fall in wages might undermine the recovery in consumption in the quarters ahead. Chicago Fed governor Charles Evans said that the Fed should hold off raising rates this year on the basis that if inflation is going to get above the 2% target then wages need to be rising.
– On the topic of inflation, it’s worth noting the raft of inflation data out this week which could make the very case Evans is talking about for both the Fed and for the ECB’s QE program. US CPI on Friday is going to be HUGE.
– Also worth noting from a macro-trading perspective is that the US dollar has lifted its foot off the throat of the Aussie dollar, euro and sterling. Perhaps it is simply that it has risen, they have fallen, too far too fast but equally it could be that much positive news about Fed tightening was priced in. The data over the early part of 2015 already suggests that while the economy is rising, if the Fed is serious about price rises and fighting the potential for deflation, then “patience” might end up meaning more than the couple of meetings last week’s FOMC minutes suggested.
– Anyway, at the close of what was a volatile week on US stock markets and with earnings season about to kick off, the scoreboard in the US reads:
- Dow Jones down 0.95% to 17,737
- Nasdaq down 0.68% to 4,704
- S&P 500 down 0.83% to 2045 (watch 1,990 – last week’s low – as important support)
– European markets were under pressure once the US markets opened and the fall in oil doesn’t help stocks in the region either. So it was a down day in the core and a huge down day in Club Med.
Anyway, at the close:
- London(FTSE 100) down 1.05% to 6,501
- Frankfurt (DAX) down 1.92% to 9,649
- Paris (CAC) down 1.91% 4,179
- Milan (FTSEMIB) down 3.27% to 18,177
- Madrid (IBEX) down 3.91% to 9,719. Santander’s discounted equity issue really weighed.
– Locally the price action offshore, a little iron ore weakness and oil down again has the market slated to open lower. March SPI 200 futures fell 40 points to Saturday morning’s close at 5,382 bid.
– In Asia Friday, the Nikkei and hang Seng were up marginally rising 0.18% to 17,198 and 0.355 to 23,890 respectively. Shanghai continued to march to the beat of its own leveraged drum, falling 0.26% to 3,285 after making a new high for this run at 3,405. Silvercrest Asset Management’s managing director and chief strategist, Patrick Chovanec, summed it up best on Twitter this morning:
– On bond markets, rates continue to be super low as they factor in falling prices in many European countries and disinflation in the US and elsewhere. US 10’s closed Friday at 1.95%, German Bunds closed at 0.5% while in the UK, 10-year Gilts finished the week at 1.6%.
– Currencies have been really interesting already this year. The Aussie looked headed toward 78 cents early last week after the euro was smashed in early Asia last Monday. But the Aussie traded above 82 cents Friday night, closing just off the highs at 0.8201. Euro recovered, just a little, to 1.1844, GBP closed at 1.5160 while the yen finished the week at 118.50.
– On commodities iron ore was lower by $1.03 a tonne on Friday and the January rally might already be over. Newcastle coal finished the week with the March contract at $57.55 a tonne! Elsewhere gold is threatening the launch of a new rally after Friday’s close at $1,219.50. Nymex crude ended at $48.21 a barrel while copper is at $2.79 a pound.
On the data front today, we get ANZ job ads as a precursor to Thursday’s employment report as well as home lending data. Otherwise it is a fairly quiet 24 hours.