Stocks down but Aussie up as Dollar Bloc rises again

April 7, 2014

The market is a weird collection of hope and fear and on Friday we got to see both sides of the coin with stocks in the US tanking relative to the data flow from non-farm payrolls after an early rise.

The funny thing to figure  – the thing that is always difficult to fathom – is exactly what drove the move given that non-farm payrolls only missed expectations by a tiny margin of 8,000 jobs.  But stocks in the US came under heavy selling pressure which then saw the ASX sell off heavily as well with the SPI 200 June contract down 41 points when it closed Saturday morning at 5,382 bid.

Strangely the Aussie dollar is higher which we’ll discuss below.

In the US the non-farms printed 192,000 against expectations of 200,000. Sure the unemployment rate didn’t fall to 6.6% as the market expected holding firm at 6.7% and hourly earnings were flat but the reaction in stocks was aggressively negative.

At the close the Dow fell 0.96% or 160 points to 16,413. The S&P 500 lost 24 points or 1.26% in a very bad days trade technically with a higher high and a lower low than the day before. The S&P closed at 1,865. But it was the Nasdaq where the real damage was done losing 2.59% to close at 4,128.

As you can see in the chart above it was a big ugly reversal for the S&P 500 technically and if it takes out the lows of Friday night this week it will be in for a much bigger fall.

In Europe though traders were far more ebullient with stocks up across the board. The FTSE 100 in London rose 0.7% to 6,696, the CAC was up 0.8% to 4,485 while in Frankfurt the DAX rose 0.7% to 9,696. In Madrid and Milan stocks were 0.83% and 0.88% higher respectively.

In Asia the Nikkei on Friday ended fairly flat at 15,064 but in futures trade the front contract has lost 1.3% in response to the US move and a big reversal of USDJPY off 104. Shanghai rose 0.75% in the run up to the Weekend’s Ching Ming Festival and Holiday today.

On Currency markets the Dollar bloc (Aussie, Kiwi and Canadian Dollars) is back in vogue once again and the Aussie dollar benefited on Friday rallying back toward 93 cents sitting up at 0.9384 making bears very nervous. Elsewhere the Euro is under pressure supported by some technical levels but slipping just below 1.37 at 1.3698 this morning in Asia.

Euro looks like it has a 150 point drop coming.

Sterling sits at 1.65723 and the Yen has gained on the US dollar with a big selloff in USDJPY leaving it vulnerable to a sell off according to Marc Chandler who wrote over the weekend “it does look as if the move above JPY104 completed some technical phase” identifying 102.60 as a target level.

On commodity markets gold has regained $1300 sitting at $1,302 this morning for a gain of 1.46%. Crude rallied as well up 0.85% to $101.06 while copper closed at $3.04 lb. On the Ags it was positively quiet with corn up 0.35%, wheat down 0.92% and soybeans lost 0.1%.

On the data front today see’s the release of the ANZ job ads which will be an important lead before Thursday’s jobs data in Australia. In Germany Industrial production will be mildly interesting as will the Sentix investor confidence numbers. Nothing in the US.

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