Stocks indices slide continues as USD remains bid
* Nasdaq falls for a second day after worst session since October
* Ten-year US Treasury yield tops 4% before paring gain
* US job openings, quits and hiring ease as labour market cools
* Gold drops on rising yields, oil rises on Middle East turmoil
FX: USD advanced again to a two-week high and closed above 102 on the DXY. The greenback has not fallen at the start of the calendar year since 2012. And the start of 2024 is the biggest rally since 1997. Markets await the monthly non-farm payrolls report on Friday.
EUR fell to 12-day lows and below the halfway point of last month’s rise and 21-day SMA. Next support is the 200-day SMA at 1.0845. Markets give the first ECB rate cut in March around a 60% chance. There are around 160bps of easing by year end even though ECB officials have tried to push back on rate cuts in the first quarter.
GBP was the best performer on the day as rising UK gilt yields beat US Treasuries. High inflation and the higher for longer BoE rate outlook helped sterling for most of last year.
USD/JPY rose above 143 and the 200-day SMA at 143.12. Trading was relatively subdued as Japanese markets were closed for a holiday. Markets digested softer economic data but rising Treasury yields.
AUD fell for a fourth straight day and is hovering around two-week lows. USD/CAD bounced for a fifth straight day off support around 1.32 as the loonie weakened to a two-week low. Gains in oil of above 3% did little to help CAD while poor risk sentiment added to the selling. The jobs report is released on Friday.
Stocks: US equities continued its New Year downtrend with all three main indices lower. The S&P 500 lost 0.80% to settle at 4,704. The tech-dominated Nasdaq 100 finished 1.06% lower at 16,368. The Dow fell 0.76% to close at 37,430.It is the first time the benchmark S&P 500 has started the year with two straight declines since it began 2015 with a three-session loss. Markets have turned more wary of the Fed pivot to cut rates early in the new year. Profit taking is ensuing after the stellar final two months of the year.
Asian futures trade in the red. Stocks were lower following Wall Street’s lead. The ASX 200 saw the biggest losses in gold names on the back of the dollar rebound. Semiconductor selling hit the Kospi with Samsung down 3% intraday.
Gold fell as Treasury yields and the dollar rose again. Geopolitical tensions in the Middle East continue to simmer.
Market Wrap – US ISM Manufacturing and FOMC Minutes
The trend of weak economic data continued with ISM manufacturing in contraction for the 14th straight month, even if it did tick up as expected. There was a notable jump in unemployment and new orders and the inflationary gauge of prices paid encouragingly fell, with the latter more than expected. Jobs vacancy data also confirmed cracks in the labour market. The slower pace of hiring comes ahead of the marquee NFP data released on Friday. Economists say the composition of jobs will be nearly as important as the headline print itself in determining rate cuts this year.
The Fed minutes had both hawkish and dovish aspects so were largely balanced. They suggested rate hikes were over with downside risks to the economy with an overly restrictive rate stance. But the minutes offered no timetable on cuts and there was an unusually elevated degree of uncertainty. Markets were relatively unmoved after the release with two-way price action in Treasuries but the dollar did retain a bid.
Chart of the Day – Bitcoin falls over 5%
The world’s biggest and most popular cryptocurrency slid 5.07% and is now down 7% from the previous day’s multi-month high at $45,925. Concerns spread about the SEC’s potential rejection of spot Bitcoin trading after the publication of a supposedly private report said it would reject approval for an exchange-traded product on a US exchange. Numerous asset managers including Invesco and BlackRock – a firm with roughly $9 trillion in assets under management – have applied for a spot Bitcoin ETF.
The most traded cryptocurrency has been consolidating above $42,000 for most of December and the midpoint of the 2021/22 drop at $42,230. But a breakout looked underway on the first trading day of the year. Sadly for the bulls, the speculation about no approval saw Bitcoin drop to the 50-day SMA at $40,946 before losses were pared.