Nonfarm Payroll: Unemployment printed a multi-year ow of 4.9% whilst the headline figure fell short of expectations of 151k (190k forecast). Whilst the data is unlikely to change any minds regarding monetary policy, Janet Yellen will take comfort in the unemployment data.
Mixed data from Canada: It was a bitter sweet on Friday for Canada's economy which saw unemployment rise to 7.2% and few jobs were created (when there was an expectation of 5.7k jobs). However Ivey PMI saw business expand to 66, it’s highest since April 2011, well above the 50.3 forecast. All four sub-indices expanded, with the price index at 71.6 (12 month high).
RBA lower inflationary expectations: The Central Bank held rates at a record low of 2% and the statement highlighted lower inflation expectations. GDP forecasts remained steady, which in itself could be taken as a bullish sign when the global trend is to lower forecasts, whilst also expecting unemployment to lower further. ANZ bank noted a lack of discussion on downside risks to the economy, citing it as 'odd'.
Global PMI data continued to disappoint: Markit PMI data, on balance, fell short across the globe for manufacturing and services. However the majority of the manufacturing and services read according to PMI continue to expend but at a slower pace. If we are to look at the ISM read then US manufacturing is contracting and ISM non-manufacturing now sending growth concerns for the world's largest economy.
BoE voted unaminsouly to keep rates on hold: Previous months had seen one voting member call for a rate hike. However with with growing concerns of FED not raising at all this year and BoJ going with negative rates, then it shouldn't be too much of a surprise to see this voting member get back in line with the majority.
ECB President Draghi warns on risks of low inflation: It is almost a certainty that ECB will announce increase its bond purchases (QE), citing that they will "not surrender" to low inflation. However we could see a combination of more QE alongside further reduction of negative interest rates, since BoJ surprised markets by announcing negative rates (and potential to decrease them even more).
EUR Futures: Despite dovish comments from Draghi and a growing expectation of further stimulus (weaker Euro) we see large speculators have increased their long bets to the highest level since May 2014. At the same time shorts are being closed to see short exposure from large speculators at its lowest since Oct '15. This has sent the long/short ratio to its highest level since Oct '15.
USD Futures: No significant changes to the USD long/short ratio however the large decline on the USD Index was on Wednesday, one day after the report was collated. So we should see a significant shift in the ratio when the CFTC report is released on Friday and is likely to correlate (negatively) with Euro futures.
JPY Futures: The inflow of bullish bets on JPY futures did not go unnoticed by BoJ, who sent their interest rates negative. However when you consider the turmoil this created across the markets then we could have expected to see long bets weaken further than they did. However they remain net long and at a higher level than USD futures, which is not something that has been witnessed for quite some time.
USD: Closing just above 97, the USD Index finds itself at 12-week lows having suffered its worst weeks trading in 11 months.
Stocks: Global stocks were weighed down by growth concerns and poor earnings. Price action remains eerily similar to the 2007 top and the majority of them have now achieved the 20% decline to mark a technical bear market.
Commodities: Gold continued to retain its safe haven status whilst WTI remains volatile, but elevated form the multi-year lows. Price and data diverged last week, where negative news sent oil higher. However when you see consecutive sessions of 8-12% in both directions then we have to assume the fundamentals are not driving the market, but investor sentiment (which is panic) and position readjustment. When volatility reduces we may be in a better position to assume a direction in line with fundamentals.
Weekly Wrap: 8th Feb 2016
A snapshot of money flow and events from last week, to help kick-start the trading week ahead.