Global Travel Media » Blog Archive » Stocks rise, yield curve steepens on Fed rate cut bets

Home » Business News » Currently Reading:

Stocks rise, yield curve steepens on Fed rate cut bets

June 7, 2019 Business News No Comments Email Email

US stocks posted strong another round of strong gains as Fed rate cut bets continue to rise. Some analysts are starting to believe the June meeting could be a live one, if we see a dismal non-farm payroll report on Friday.http://www.stevecafeandcuisine.com/ On the trade front, continued optimistic tones are coming from Mexico, but that does not matter until we hear from President Trump, who is busy concluding his European trip. Asian equities are likely to get a boost in early trade following mostly positive tones regarding trade and increased odds stimulus is coming to the world’s largest economy.

The Dow Jones Industrial Average and S&P 500 Index both rose 0.8%, while the Nasdaq climbed 0.6% higher. Treasuries bulls steepen after the ADP miss, with the 2-year and 5-year yields settling lower, while the 10-year and 30-year yields rose. With Treasuries surging, led by the front and belly of the curve, markets are overly confident that the Fed will cut rates soon. Oil got crushed from a very bearish EIA inventory report and gold continued rally but pared gains after hitting some key technical resistance levels.

  • ADP – US labor market shows weakness
  • Beige Book – Mostly positive
  • Oil – Crude weakness underpinned on trade uncertainty
  • Gold – Slightly softer on easing of trade tensions

ADP

The ADP Research Institute’s jobs report posted the lowest creation of private sector jobs since March 2010. The May reading showed 27,000 jobs were created, much lower than prior month’s 271,000 reading and a huge miss of the 185,000 jobs expected. The report highlights growth is slowing and that the economy is weakening. With markets so focused on further deterioration with US economic data, today’s release raises expectations that we could see softness with Friday’s non-farm payroll. Current forecasts are calling for Friday’s report to show 180,000 but as analysts downgrade their forecast, we could see that settle closer to the 160,000 region. Markets are firmly pricing in rate cuts, with a 24.5% chance for a cut at the June 19th meeting and 69.8% odds of a cut at the July 31st meeting, but if we see a big miss with non-farm payrolls, we could see the June meeting become a live one.

Beige Book

The Beige Book’s first line told you everything you needed to know about Fed’s take on the current economic conditions. The report stated, “Economic activity expanded at a modest pace overall from April through mid-May, a slight improvement over the previous period.” The report’s broad strokes were encouraging, but markets appear more focused on the Friday’s employment report. As expected, the Beige Book did not provide any clarity as to what the Fed’s next move will be. The outlook going forward was solidly positive but modest, with little variation among reporting Districts.

Oil

Crude prices got crushed after an extremely bearish EIA report. Crude inventories rose 6.77 million barrels, compared to analyst expectations for a 1.6-million-barrel draw. With inventories continue to rise despite the government’s release of supplies from the Strategic Petroleum Reserve. A key highlight was the biggest rise in crude and products stocks in data since 1990. Glut fears and damaged sentiment from multiple trade wars could leave WTI vulnerable to breaching the USD50 a barrel level. Brent already breached the USD60 a barrel level for the first time since January.

The risks are high for further downward pressure, but we should see prices stabilizing as several geopolitical risks remain in place. Oil should remain volatile because we could see strong bullish momentum return if we see a softer US dollar, trade progress from the G20 Summit, prompting the alleviation of demand fears, geopolitical risks will keep supplies tight and rising summer demand. If we see oil prices get worse, key support may come from the USD45 a barrel level.

Gold

Gold prices quickly reversed after forming a double-top pattern and US stocks continue to build off their recent gains. Gold prices were ripe for a pullback after the last several sessions saw the best rally since 2016. The softest private payroll reading in the nine years saw gold surge to the USD1,348.90 high before reversing backing down towards the USD1,333.00 region. Trade tensions remain high and fluid, thus providing enough uncertainty to keep demand in place for the safe-haven. The dollar reversal appears to be taking a break, with the greenback up slightly on the day. If dollar weakness is sustainable, the precious metal should not have any difficulty targeting the 2018 high region of USD1,369 an ounce.

Melinda Earsdon Melinda Earsdon
Global Head of Public Relations at OANDA

Email
mearsdon@oanda.com
Mobile
+65 9109 4944

This contents of this article are for general information purposes only and do not take into account your personal circumstances. This is not investment advice or an inducement to trade. The information shared is for illustrative purposes only and may not reflect current prices or offers from OANDA. Clients are solely responsible for determining whether trading or a particular transaction is suitable. We recommend you seek independent financial advice and ensure you fully understand the risks involved before trading. Leveraged trading is high risk and not suitable for all. Losses can exceed investments.

In accordance with the General Data Protection Regulations (GDPR) your email address is only being used by us to send you market commentary and your information will not be passed on unless I have your consent or am required to do so by law. If you don’t want to receive these updates any more, either unsubscribe reply to this message stating so and your details will be removed. Alternatively, you can unsubscribe using the link below.

Opinions are the authors; not necessarily that of OANDA Global Corporation or any of its affiliates, subsidiaries, officers or directors.

Comment on this Article:







Time limit is exhausted. Please reload CAPTCHA.

Platinium Partnership

ADVERTISEMENTS

Elite Partnership Sponsors

ADVERTISEMENTS

Premier Partnership Sponsors

ADVERTISEMENTS

Official Media Event Partner

ADVERTISEMENTS

Global travel media endorses the following travel Publication

ADVERTISEMENTS

GLOBAL TRAVEL MEDIA VIDEOS

Advertisements

sitemap