Weekly Market Commentary
Non-Farm Payrolls missed expectations for September, but August was reviewed sharply higher, while the headline Unemployment number fell to the lowest level since 1969 (3.7%)! US equites added to the previous day's losses, in sharp reply to the Employment data, which boosted the US 10 year bond yield to 3.24%. US interest rates reflect the market and will lead the Fed to hawkish monetary policy. Fed Chair Powell has iterated that 'interest rates are a long way from neutral'. The US economy is booming and the Labour market remains tight, driving wages and interest rates higher, which has mixed effect on equities. Equities remain at record highs, although the end of week correction allowed shares to drift, but productivity and profit continue to drive them higher.
Global trade wars have been the major risk to markets, but the Canadians return to the fold and signing the USMCA, smashed much of market uncertainty. The Japanese and Indians have both indicated an intention to sign an agreement with the USA, on a bi-lateral basis. The Chinese are the now the only significant hold out and considering the trade imbalance, will likely compromise soon. This hold out is impacting the trade dependent and exposed nations of Australia and NZ and has been a influence on the associated currencies. The AUD has fallen to 0.7050, looking extremely vulnerable, despite a strong domestic economy. The NZD has collapsed to 0.6440, which is a symptom of the rising reserve, but domestic economic conditions remain challenging. NZ cost of living is becoming prohibitive, to the average consumer, while wages remain soft. The Government has little in the way of solutions and are indicating legislative wage rises, which are ineffective and damaging to business and prices. Wages should be driven by demand and raising labour costs will only add to the rising cost of living.
The GBP regained 1.3100, which has been buffeted by Brexit speculation, amidst the Conservatives conference. The EUR regained 1.1500, while the reserve took a breather, as the Yen held below 114.00. US CPI data will confirm strong growth and inflationary pressures, in the coming week, which should support a bullish Dollar. Trade threats surrounding China, will continue, as speculation will drive daily moves.
Weekly Market Calendar
8/10 Australia Job Ads, China Services/Composite PMI, German Industrial Production
9/10 Australia Consumer Confidence, Japan Current Account, Japan Trade, NZ Home Sales, Australia Business Confidence, German Trade, German Current Account Exports/Imports
10/10 NZ Credit Card Spending, Australia Consumer Confidence, UK Trade, UK Industrial/Manufacturing Production, UK GDP, Weekly Mortgage Applications
11/10 NZ Food Prices, UK House Prices, US CPI, US Weekly Jobless Claims
12/10 NZ Manufacturing PMI, China Trade Exports/Imports, German CPI, EU Industrial Production, University of Michigan Sentiment
Paul Bettany
Collinson & Co
0406-744-923
paul@collinsonfx.com