A Calamitous Affair

Following the US ADP employment report miss, U.S. Treasury yields fell; the Yen soared, The S&P 500 suffered its first back-to-back drops of more than 1% this year, Crude futures tanked to their weakest levels in a month while gold prices rallied back to the critical $ 1500 level.
Stephen Innes
A Calamitous Affair

Investors may have interpreted the US ADP report as further proof that the U.S. economy is slowing and possibly on the verge of a recession sending the S&P 500 to its first back-to-back drops of more than 1% this year and breaching the critical 2900 level.

The market was still digesting the weaker ISM data, and the implication for global growth then got whacked with the slide on the ADP data compounded by a precipitous decline in U.S. auto sales. Which now raises more questions than answers about the resilience of the U.S. consumer.

The equity market price action was telling as it moved well beyond cyclical stocks and growth reactionary higher beta sectors like Oil, Miners & Industrial but was broad-based suggesting that investors are not only taking chips off the table but might also be folding their cards.

Also, the U.S. levied E.U. goods with new tariffs greenlighted by WTO ruling adding another brick in the wall of worry for E.U. investors

Trade optimism could keep the risk on light flickering, but the dreary economic data does perhaps suggest that traders could be better sellers it this risk toxic environment.

Oil, slip-sliding away.

U.S. oil prices plummeted below $53 a barrel. Aggravating the week-long price slide was a government report indicating U.S. crude inventories increased. Which of course poorly contrasted the apparent one-off API survey draw that was thought to be a result of oil stores getting depleted due to the knock-on effect from the terrorist attack.

However, ignoring the inventory reports which have a propensity to swing wildly and forever miss ” analysts ” expectations. What’s impossible to ignore is the economic realities being signalled in the latest run of doom and gloom financial market data which offers few if any reason for Oil investors to be optimistic over the outlook for global demand.

While the near-term triggers may continue to relate to oil demand, next week US-China trade talks remain the unknown variable which could lend a modicum of support

All that glitters are gold.

The disappointing data out of the U.S. and Europe, as well as weak earnings reports from automakers this week, has equity investors looking to golds umbrella to wait out this building storm.

Gold and silver are both trading constructively as 10-year US yields push below 1.60%, with equities under pressure. The ten years low in U.S. manufacturing ISM is being taken as a severe warning sign. With the market risk lights shifting from amber to flashing red, gold and silver may continue to be the haven beneficiary as investors diversify away from risk assets.

Currency markets

Let the games begin
Its all about the leak in U.S. consumer data highlighted by the miss in private payroll and calamitous auto sales data

On the back of the weaker U.S. data prints, the USD has lost some of its shine from a growth differential prospect and with the U.S. yields toppling, a yield differential perspective also.

The SPX broke critical supports at its 50-day and 100-day moving averages, and risk sentiment continues to wobble. As a result, USD is struggling vs JPY and gold, but the greenback is holding up vs E.M. and higher-beta G10.

Even at 107 and change, given the global economic backdrop and potential for risk aversion to take hold the USDJPY may move lower but remains precariously perched tentatively bid above 107 support on possible trade optimism

This article was written by Stephen Innes, Asia Pacific Market Strategist at AxiTrader

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US