6 Sep 2013
Markets and Bonds on a positive momentum ahead of NFP release
FXstreet.com (Athens) - Mario Draghi more dovish than expected…and the key data that was always going to determine the FOMC decision will be released today; US markets up for a third day.
Draghi was as dovish as possible yesterday, stating that “ECB keeps further rate cuts as an option should market yields reach ‘unwarranted’ levels.” But apart from Draghi, euro zone is amidst new fears such as, a fragile Italian coalition government, a new Greek bail-out package and last but not least, Cyprus voting down policy needed for its rescue. What’s more, the ADP employment increase of 176K, was good enough to spread optimism for today’s NFP reading.
U.S. stocks edged up on Thursday, rising for a third day after strong data indicated improving economic conditions, with caution capping gains ahead of Friday's payrolls report and its implication on the Federal Reserve's stimulus program. To be more precise, the Dow Jones industrial average rose 6.61 points or 0.04 percent, to 14,937.48. The S&P 500 gained 2 points or 0.12 percent, to 1,655.08. What’s more, the NASDAQ Composite added 9.743 points or 0.27 percent, to 3,658.785. Finally, about 5.3 billion shares changed hands on the New York Stock Exchange, the NASDAQ and NYSE MKT, below the daily average so far this year of about 6.26 billion shares.
Regarding bond markets, Jim Reid and Colin Tan, on behalf of Deutsche Bank AG- Fixed Income Research, suggest that “As for markets the positive momentum in the US data flow continues to add negative pressure on Treasuries as we saw the 10-year yield soar and close near its intraday highs of 2.9993%. In after hours trading and in the Asian session we've now breached 3% a couple of times. The last time the 10-year yield was this high was in July 2011 just before the US debt-ceiling fears intensified which eventually led to the downgrade of its AAA sovereign rating. As we highlighted in our latest August performance review on Monday, the very aggressive back-up in US yields have not just had a spill-over effect on other DM core yields but have also added serious pressure on EM carry. Indeed since Bernanke’s infamous tapering speech on the 22 May, 10-year government yields in the US, UK, Germany, and France have risen 96bp, 111bp, 62bp and 73bp respectively. Across EM, we’ve also seen the local currency of Indonesia, India, Brazil and Turkey lose 16.3%, 15.9%, 11.8% and 10.6% against the Greenback, respectively.”
Draghi was as dovish as possible yesterday, stating that “ECB keeps further rate cuts as an option should market yields reach ‘unwarranted’ levels.” But apart from Draghi, euro zone is amidst new fears such as, a fragile Italian coalition government, a new Greek bail-out package and last but not least, Cyprus voting down policy needed for its rescue. What’s more, the ADP employment increase of 176K, was good enough to spread optimism for today’s NFP reading.
U.S. stocks edged up on Thursday, rising for a third day after strong data indicated improving economic conditions, with caution capping gains ahead of Friday's payrolls report and its implication on the Federal Reserve's stimulus program. To be more precise, the Dow Jones industrial average rose 6.61 points or 0.04 percent, to 14,937.48. The S&P 500 gained 2 points or 0.12 percent, to 1,655.08. What’s more, the NASDAQ Composite added 9.743 points or 0.27 percent, to 3,658.785. Finally, about 5.3 billion shares changed hands on the New York Stock Exchange, the NASDAQ and NYSE MKT, below the daily average so far this year of about 6.26 billion shares.
Regarding bond markets, Jim Reid and Colin Tan, on behalf of Deutsche Bank AG- Fixed Income Research, suggest that “As for markets the positive momentum in the US data flow continues to add negative pressure on Treasuries as we saw the 10-year yield soar and close near its intraday highs of 2.9993%. In after hours trading and in the Asian session we've now breached 3% a couple of times. The last time the 10-year yield was this high was in July 2011 just before the US debt-ceiling fears intensified which eventually led to the downgrade of its AAA sovereign rating. As we highlighted in our latest August performance review on Monday, the very aggressive back-up in US yields have not just had a spill-over effect on other DM core yields but have also added serious pressure on EM carry. Indeed since Bernanke’s infamous tapering speech on the 22 May, 10-year government yields in the US, UK, Germany, and France have risen 96bp, 111bp, 62bp and 73bp respectively. Across EM, we’ve also seen the local currency of Indonesia, India, Brazil and Turkey lose 16.3%, 15.9%, 11.8% and 10.6% against the Greenback, respectively.”