Dollar Dropped Amid Falling Yields

STATE OF THE MARKETS

Dollar dropped amid falling yields. While US stocks erased earlier gains after news of strong jobs data. ADP employment report showed private employment rose significantly more than expected (235k vs. 150k), sending signals that the Federal Reserve may have to raise rates higher for longer. The tech-laden Nasdaq (-1.47%) fell the most, followed by S&P (-1.16%), Russell (-1.09%) and Dow (-1.02%) as flows to bonds receded, sending yields higher. The shorter 2Y jumped to 4.49% while the 10Y benchmark hit 3.77% as the Dollar index spiked past the 105.20 barrier.

In the commodity markets, demand concerns and Dollar strength pulled crude oil lower to $72.60/bl before bidder emerged to settle the black gold higher around $74.05/bl as New York closed. Speculation on longer and higher rates from the Federal Reserve put gold under pressure as the metal closed lower around $1,832.60/oz. Elsewhere, iron ore stalled around the $115/tn handle waiting for the next catalysts.

In the FX space, short and medium term sentiments were bullish as the Swiss pulled back in demand, while Aussie, Dollar and Loonie advanced into the demand territories. Sterling remained under pressure while Euro was in limbo across the board.

On Friday, all eyes will be on the non-farm payroll reports as any significant jobs drop and higher unemployment may fuel equities rally. Shall the opposite happen, we might see a stronger Dollar as markets speculate on a more aggressive Federal Reserves. Earnings releases to watch include Greenbrier (GBX).

G8 CURRENCIES SENTIMENTS

** ST refers to Short-Term daily turnover, MT is Medium Term weekly 
and LT refers to Long-Term monthly turnover.

WALL ST MOST ACTIVE

** % Change here refers to price vs previous day price

WALL ST TOP FLOWS

** % change here refers to volume vs. 20 days average volume.

TOP 5 BLOCK ORDERS

OUR PICK – No New Picks

No new picks going into the weekend. Another week of outflows in equities (-$5.1 billion) alongside the taxable bond funds (-$2.1 billion), while heavy flows into the short term money markets (+$57.8 billion). It seems that investors are convinced that the Federal Reserve is going to raise rates higher for longer and the employment data on Friday will set the tone for the short and medium terms.

Trades updates: 

Equities:  While M (42% undervalued, 2.92% yields), SQ (about 10% overvalued with 3.88 z-score), CRON (31% undervalued with 19.32 z-score), AUY (11% undervalued, 2.06% yields) and T (about fairly valued, 5.78% yields)  continue to climb higher this week; WBA (12% undervalued, 5.12% yields) and VIPS (35% undervalued with 3.93 z-score) pulled back on profit taking but on held steady.

FX & Commodities:  NZD/USD was stopped out.

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Disclaimer:

This article is for general information purpose only. It is not an investment advice or a solicitation to buy or sell any securities. Opinions expressed are of the authors and not necessarily of MFM Securities Limited or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.