Stock market investors remain utterly unfazed by the prospects of trade tariffs or even higher interest rates as consecutive monthly payroll numbers continue to support the Goldilocks economy sweet spot scenario. Employers are aggressively ramping up staff, but wages are rising much less dramatically. So far, investors remain focused on a broader subset of US economic data while concluding that US earnings and the economy are sufficiently robust to keep the equity bull market intact. And for the time being, putting the prospects of higher US interest rates and global trade wars, which usually scare investors stiff, on the back burner.
With very few new developments in play, the markets continue regrouping after last week’s Italian tumult, but there’s a lot more waiting and watching going on than price action suggests. Many market participants think that by ignoring tariff and higher US interest rates, some investors are viewing the current landscape through rose coloured glasses.
Oil Market
WTI took a deep dive below the key $ 65.00 per barrel level as the long liquidation continues all the while hedge funds continue to increase short bets for the 3rd consecutive week. Again, it’s all about supply, whether it’s OPEC raising output or US increasing production, all roads lead to higher global oil supplies, which is leaving oil traders shaking in their boots.
There was no pushback after Saturday’s meeting between the Saudis and the other Arab producers. Adding to the downward momentum as traders added on more short positions
From a technical perspective, taking out the 100 days moving average for the first time since September 2017, suggests there’s more hurt to come.
Gold Market
Demand for safe havens is incredibly soft which is hurting golds appeal more so with investors showing little concern about a trade war. The markets remain on the defensive ahead of next week Fed rate hike and more specifically the Fed’s forward guidance after another stellar Non-Farm Payrolls data. With little more than tier two economic to glean while in the midst of the fed blackout period, demand for gold should slow especially as safe haven appeal subsides.
Currency Market
Currency markets played out predictably overnight with the widely expected Euro relief rally triggering broader USD weakness. But with US yield and equities moving higher, the Euro ran out of gas in NY after falling shy of breaking significant topside resistance.
Yesterday’s APAC session reluctance to engage USD/JPY topside risk gave way to the USD/JPY’s sensitivity to US yields as the pair tracked US bond yields higher throughout the NY session.
The Australian dollar has been the top performer overnight after domestic retail sales finally showed some Moxy. The Aussie was then further supported by a firm global equities market performance auguring well for FX high beta like the Aussie dollar.
The Ringgit is benefiting from positive global risk sentiment and the positivity surrounding the upcoming Trump-Kim summit slated for June 12 in Singapore.