Headlines

* Recession risks knock stocks, speculators drawn back to yen

* AUD falter as Australia jobs surprisingly fall, easing case for RBA rate hike

* China growth forecasts raised next year as country reopens

* Gold edges higher as investors weigh Fed slowdown chances

FX: USD endured a choppy day of price action. The DXY made a new cycle low at 101.52 before pulling back after the US data and stock slump. Treasury yields fell sharply. The 10-year Treasury, the global proxy for borrowing costs, sunk to new lows last seen in September. It looks to have broken strong support at 3.42% and has fallen to the 200-day SMA at 3.33%.

USD/JPY is trading lower this morning after a wild day yesterday. It staged a full reversal after spiking to 131.57. Yesterday’s candle is very bearish and a rejection of higher prices. The major is now trading around long-term support at 128.16. EUR is back around 1.08 after venturing to a new top at 1.0887 yesterday. Key support sits at 1.0750. GBP only partially held onto gains seen after the CPI data. That showed headline inflation easing but still more than five times the BoE’s target of 2%. AUD is the worst performing major today after disappointing jobs data. The aussie is back below support at 0.6915 after spiking to 0.7063 on Wednesday. USD/CAD broke out of the range to the upside. It has hit resistance at 1.35 with a Fib level and long-term SMAs.

Stocks: US equities closed lower in a rollercoaster session. The post-BoJ strength was unwound after a slew of disappointing US data releases and hawkish Fed rhetoric. The benchmark S&P 500 dropped 1.56%. The Dow declined 1.81%. The tech-heavy Nasdaq fell 1.27%. Stocks leaked into the close and finished on their lows. Recent optimism over a soft landing took a hit.

Asian stocks have been trading mixed today after the negative lead from Wall Street. The Nikkei 225 underperformed after markets mostly faded the BoJ rally. The bank’s decision to refrain from policy adjustments is simply delaying the inevitable. The ASX 200 climbed above 7,400 led by miners after an increase in BHP’s quarterly iron ore output.

US futures are modestly softer. Futures in Europe are indicating a weaker open (-0.6%). The cash market closed unchanged yesterday.

Gold fell for a third day but tapped support at $1896. That is a major Fib level (61.8%) of the last year’s decline.

Market thoughts – Bad news is bad news

After the volatility from the BoJ meeting, markets got hit by bad US data. Deteriorating retail sales and industrial production hurt the recent positive risk mood. While easing price pressures continue to be a good thing for markets, concerns around slowing economic growth hit risky assets yesterday. This saw big moves in bond markets with yields down 17 points on the 10-year US Treasury. The BoJ decision to stand pat and the ECB sources story pondering hiking size added fuel to these moves.

More hawkish Fed commentary also added to the headwinds, although Bullard is obviously a known hawk. All eyes had been on stocks and especially the benchmark S&P 500. The 4k level is a key technical as well as psychological marker. This zone includes the 200-day SMA and also long-term trendline resistance which has capped the upside several times over the past 12 months.

Chart of the Day – Dow struggles again at critical resistance

We checked out the S&P 500 chart late last week highlighting the 4k area. The Dow is worth a look after yesterday’s rejection at major resistance. The August high at 34,281 held off the bulls in late November and mid-December. Prices have failed again around this level. Yesterday’s tumble also took the index through a Fib level (61.8%) of last year’s drop at 33,806 and the 50-day SMA at 33,559. The 50% level sits at 32,834 which is above December’s sideways price action. Procter & Gamble and Netflix results out later today will inform on global consumer strength.