Morning Briefing – payrolls afterglow

<p>Two and a half days later, it’s still all about last Friday’s non-farm payrolls, when a blow-out 255,000 addition to the US employment market fuelled a global stock market rally and blew pure oxygen on gasping bond yields.</p>

  • Two and a half days later, it’s still all about last Friday’s non-farm payrolls, when a blow-out 255,000 addition to the US employment market fuelled a global stock market rally and blew pure oxygen on gasping bond yields.
  • The rally is still going, taking Asian stocks to a new high for the year, if you agree MSCI’s Asia-Pacific Index (excluding Japan) is the appropriate benchmark. It rose 0.7% and hit its highest level since August last year, having risen 12% over six weeks. Japan participated this time too, in quite a big way, with the Nikkei rising more than 2%, enabling Tokyo shares to retake almost all of the ground lost over the last five weeks. Japanese stocks are therefore showing increased resilience to the yen, which to be sure seems nowhere near close to ending its all-year-long rally, though is 0.6 of a yen weaker against the dollar on Monday. Even so we still expect the daily Ichimoku Kinko Hyo cloud to begin to apply pressure again should the rate reach 102.95 yen per dollar in the near term (say about a week).

 

 

DAILY CHART: USD/JPY

USDJPY DAILY 1103BST 08082016 after payrolls

 

Please click image to enlarge

 

And the other global markets at online time looked like this:

 

 

GLOBAL MARKETS  MORNING BRIEFING 08082016

Note: ‘Canadian dollar’, ‘Swiss franc’ and ‘Japanese yen’ are traded as dollar pairs, hence for those currencies, a negative percentage/net change denotes a rise per dollar and a positive change denotes a fall per dollar. 

 

  • As you can see from the euro traded against the dollar, the pound, the franc and the yen, and also by the DAX’s rally, there seems to be a bit of European-specific impetus going on as well. Indeed there is. A better than expected result by industrial production in the engine of the trading bloc, Germany, is reinforcing the floor under German stocks and bringing cheer to the rest of the broad region’s riskier markets too. Whilst production rose 0.8% against 0.7% forecast month-to-month in June, attention has also fallen on the revision of the May reading to a fall of 0.9% instead of a 1.3% fall, though that’s still in the context of a 1% decline in the second quarter which will be impossible to revise away entirely.
  • Still, the hope is that the robust factory data heralds subsequent strength in the single-currency area’s wider economy, an update of which will be available on Friday.
  • Britain’s currency and economy are of course the outliers of late, as neither can be said to be going great guns. Good news for the US job market is still good news for all global stock markets, including the FTSE 100 on Monday, to a modest degree. But the strengthening dollar is also clamping down further on gold and, not to mention sterling. The latter has now definitively breached closely watched support between $1.3070 and $1.3100, and, absent a near-term recovery, it could even be that the pound is again vulnerable enough to face another test of levels as far as or at least close to 30-year lows, slightly under $1.28.
  • That said the rest of the week’s most important scheduled economic focus points are bereft of inputs that are likely to be sensitive enough to significantly weaken sterling further, on their own.

 

  • Tuesday 9th August                        -              China CPI (July)
  • Tuesday August 9th                         -              UK Manufacturing Output (June)
  • Wednesday 10th August              -              Japan Machine Orders (July)     
  • Thursday 11th August                    -              Japan Machine Orders (July)
  • Friday 12th August                          -              Eurozone GDP (Q2)

 

 

 

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.