US dollar gets a little Mojo back after ADP employment. Will non-farms confirm?

July 3, 2014

Oh it is a big 24 hours – probably the biggest 24 hours of the year because were it not for the 4th of July holiday in the US tomorrow it would be impossible to get the convergence of a non-farm payroll and ECB interest rate decision and presser at the same time, let alone the same day.

So it’s not surprising that stocks are waiting to see what happens but that doesn’t mean that bonds and currency traders sat around. Indeed with ADP private payroll data printing 281,000 in June for the biggest rise since November 2012 the US dollar hit the Euro, yen and Aussie dollars.

indeed bond took fright with US 10 year Treasuries rising 6 basis points to 2.63%. That’s a 2.47% capital loss on the day and the US performance wasn’t the worst of it. German 10 year Bunds, which have a lower yield and thus a bigger “tic value”, rose 4 points to 1.29% for a 3.10% loss. Italian and Spanish 10′s lost about 2.5% of capital while in the UK Gilts rose 4 points to 2.75% for a loss of 1.56%.

Bonds historically and often are the catalysts for market ructions. So watch this space.

At the close then the Dow was up 0.12% as it creeps toward a close above 17,000. Last night it finished at 16,976 up 20 points. The Nasdaq fell 1 point and closed at 4,458 while the S&P 500 rose 2 points for a 0.09% gain to close at 1,975.

In Europe stocks had a mixed session with the FTSE up 13 to 6,816, the DAX up 9 points to 9,911 but the CAC fell 16 points to 4,445. In Milan stocks rose 0.54% and in Madrid they were just 0.07% higher.

Europe will be watching Mario Draghi and the ECB tonight and the presser he will be holding is due at the same time non-farms will be released a day early in the US because of the 4th of July holiday tomorrow. 10.30 pm east cost time in Australia is going to be huge tonight.

On the ASX get ready to ride the miners higher again with iron ore up strongly again and very, oh so close, to a huge break higher on a technical trading basis. Overnight the September SPI 200 contract rose 20 points to 5432 bid. Give it another 5 to 7 points and we’ll see a break of a 6 week downtrend – or not as may be the case.

Break to head toward top of the box?

On currency markets as noted above the US dollar got its mojo back from the ADP data and the Euro is down a little to 1.3659, USDJPY is up at 101.76 and the Aussie, hit by the really disappointing trade data yesterday, fell further to sit at 0.9440 this morning. Only Sterling, the now almighty Pound, managed to resist the US dollar rising every so slightly to 1.7163.

Failure?

On commodity markets iron ore finished up $1.58 a tonne for the September contract at $96.58 while Newcastle coal lost 50 cents a tonne to $70.75. Gold is trying hard to break the big downtrend and at $1,329 is very close to a break which could see it gain $50 or more an ounce. Silver closed at $21.16 while Dr Copper surged to $3.26 lb which has to tell us something of what traders are thinking about the US economic recovery. Corn lost 1%, wheat rose 0.36% and soybeans dropped 0.54%.

On the data front without overstating it this is the biggest night of the year.With both and ECB meeting and a US non-farm payrolls out we have a convergence of releases which could move markets in a material way. The market is looking for around 213,000 jobs in the US and is waiting to see what the ECB will do now it has already moved to negative interest rates.

There is also a raft of Services PMI’s from Markit and European retail sales. In Australia today we get retail sales and building permits.

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