The Market Week – September – Week 1
A volatile first full week for September; the big miss for NFP was the key headline, Yields rallied, the USD recovered its recent falls and Equities posted all-time highs but slipped following Labor Day. The RBA extended its timeframe for bond purchases, with the BOC, ECB and key US PPI data still to come.
The NFP headline missed significantly at 235,000 versus expectations of 750,000, however the rest of the report was strong with last month’s data being upgraded to over 1 million, unemployment sinking to 5.2% and Earnings up to 0.6%. The weekly US unemployment claims posted pandemic lows at 340,000 last week and are expected to fall again this week to 335,000.
The ECB holds centre stage this week, and with the RBA holding steady on tapering plans, will the cooling of growth in Europe, tempered by success of the vaccine rollout, be enough for Ms. Lagarde to add to the hawkish tilt?
The vaccine rollouts continue to drive sentiment, but the Delta variant remains a significant concern. A surge of cases in the US and parts of Asia continue to weigh. The Governor of Kentucky called it a “dire state” as cases in Australia continue to climb, but vaccinations rates there and in Japan are catching up fast.
This week FX volatility was evident again as the USD recouped some losses. The USDIndex rallied from NFP inspired lows at 91.90 to 92.70, EURUSD breached 1.1900, only to reverse to 1.1815, while USDJPY sank under 109.60, then recovered to 110.00 and touched 110.40. Cable rallied to 1.3890, before sinking to test 1.3750 on a stronger USD and a tax hike from the UK government.
US stock markets posted more new all-time highs and continue to consolidate at highs. September, particularly the second half, can be very volatile for equities. The USA500 posted new highs at 4,548 before testing 4,500, the USA30 touched 35,500 but has since moved to 35,000, the USA100 is the best performer and now holds over 15,600.
The Gold price had a particularly volatile week, as US Treasury yields rallied. The price tested the key $1834 zone following the NFP, but then reversed significantly to lows at $1792. The 20-day moving average is now up to the psychological $1800 level.
USOil prices had a volatile week too, rallying to over $70.00 ahead of NFP, before crashing as low as $67.38 as Saudi Arabia announced price cuts for its Asian customers. The key commodity has since recovered to $68.50 ahead of this week’s inventory data. The 20-day moving average is now at $68.00.
The yield on the US 10-Year Treasury Note remains very much in focus and the key market mover. A 4-week high of 1.3820% on Tuesday cooled to 1.37% but still holds significantly over 1.30% as demand for Treasuries slips and USD demand picks up.
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Stuart Cowell
Head Market Analyst
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