US market wrap: stocks rallied, yields towards multi-year highs - Westpac

Analysts at Westpac explained that European equity markets shared Asia's gloom Friday, but US stocks rallied late. 

Key Quotes:

"US equity markets were volatile on Friday, the S&P 500 falling almost 2% at one point but closing up 1.5%.

US 10yr treasury yields mimicked equities, initially falling from 2.86% to 2.79% but recovering to 2.85% (near the multi-year high of 2.88%). 2yr yields initially tumbled from 2.12% to 2.00% but only partly retraced to 2.07%. A Fed rate hike on 21 March is still seen as very likely though, above 80% priced into futures markets.

Again US equity gyrations weren’t really news-driven, with no major US data. Fed hawk (though non-voter this year) Esther George said it’s important to continue hiking gradually, with three hikes in 2018 reasonable. She welcomed the rise in wages in last week’s jobs data.

EUR/USD starts the week about flat at 1.2250, having narrowly avoided a break of 1.2200. GBP was the day’s underperformer, falling from 1.3980 to 1.3765 on negative Brexit comments from the EU negotiator. It starts the week around 1.3820, -0.7% overall.

USD/JPY fell from 109.30 to 108.05 (a low since Sep 2017) before retracing to 108.80. AUD/USD traded roughly 0.7770 to 0.7830, starting the week around 0.7810. Outperformer NZD rose from 0.7200 to 0.7260. AUD/NZD slipped from 1.0805 to 1.0747 – a six-month low.

Canada’s surge in job creation in Nov (+81k) and Dec (65k) reversed in spectacular fashion in Jan, with a headline -88k slide in total employment. The unemployment rate rose to 5.9%. Statistical noise seems to be in play but USD/CAD was rattled briefly, spiking to 1.2685 before pulling back below 1.2600. Markets price only a 15% chance of another BoC rate rise in March and are about 50/50 for April.

Event risk: Australia’s calendar is quiet today. The week’s data highlight is Jan employment on Thursday.

Singapore releases Dec retail sales data, which could produce a revision to Q4 GDP. India’s Jan CPI data is also worth noting, with consensus 5.1%yr."