Headlines

* US jobs growth expected to slow as tightening nears end

* Dollar drifts in pre-holiday trade with thinner liquidity expected

* Gold rally consolidates holding well above $2000 key level

* European shares edge higher, US equity futures mixed

FX: USD is slightly firmer but off today’s highs. Yesterday’s low at 101.41 is over 4% off its March peak before the banking crisis. The US Treasury 2-year yield is down for a fifth straight day. It looks to be heading towards the spike lows from March below 3.60%. Obviously, much will depend on tomorrow’s NFP report. The 10-year yield is lower for seven days in a row. This was last seen in February 2020. Prices are bang on the March banking turmoil trough at 3.28%.

EUR is marginally firmer today. The single currency has failed to see any meaningful reaction from the better March construction PMIs. GBP is consolidating its recent bullish breakout above the January year-to-date high at 1.2447. USD/JPY is holding up above 131 after dipping yesterday to 130.62.

The AUD continues to languish below 0.67 and the 200-day SMA at 0.6746. NZD has turned sharply lower since the immediate spike higher to 0.6379 after yesterday’s surprise 50bp RBNZ rate hike.

Stocks: US equities closed mainly lower with tech leading the losses. The benchmark S&P 500 lost 0.25%. The Nasdaq 100 closed 1.01% down. The Dow outperformed with index adding 0.24%.

Asian stocks were subdued due to the weak US data. China Caixin Services PMI numbers showed a firm acceleration in services activity.

US equity futures are mixed. European equities are positive with the UK’s FTSE 100 leading, up 0.68%.

Gold printed a doji candle yesterday after printing a fresh high at $2032. Prices dipped this morning but bugs have bid prices back to yesterday’s open/close.

Market Thoughts – Weak data driving markets

Treasuries are being bought and yields pressured by increasing recession fear. We’ve had a string of weak data out of the US with the ISM services following Mondays disappointing manufacturing figures. The former printed its lowest value since July 2020 and the employment component of the index fell more than expected.  ADP payrolls was low, though it is never a great predictor of the NFP.

Concerns around slow economic activity have seen markets now price in over 80bps of rate cuts before the year ends. Financial stability risks have added to the uncertainty. US stocks for the first time this week lost ground yesterday despite lower yields. That plays into the doom and gloom theme currently at play.

Chart of the Day – Nasdaq comes off the highs

The tech-heavy Nasdaq 100 enjoyed its best quarter since 2020 to kick off this year. Buoyed by big bets on megacap tech stocks as markets rolled back expectations for higher interest rates, the index gained 16.8%. The broader has also surprised many with the broader benchmark adding 7% in the first quarter.

We can see on the weekly Nasdaq chart the previous three week’s of gains. Prices bounced off the 200-week SMA at 11,812. Staying above the January top at 12,880 is key for buyers to maintain the bullish momentum. The next upside target is 13,463 if we get a strong weekly close.