STATE OF THE MARKETS
Flights to safety ahead of NFP. As US stocks continue to advance, with Dow (-0.09%), Nasdaq (+0.81%) and S&P (+0.42%) flirting with records high; flows to safe havens was noted as yields of 1Y, 2Y, 7Y, 10Y and 30Y all edged lower. Reports of rising labor costs and lower productivity sent precious metals complex higher together with the Dollar reaching 94.20 mark.
In the commodities market, crude was on a roller coaster, rising to as high as $83.45 before tumbling and closing lower at $78.80/bl after Saudi Arabia plans to increase its output next month. Gold pared earlier losses, back to attacking the $1,800/oz handle, after reports showed labor cost increase that re-ignited inflation concerns. Elsewhere, iron ore tumbled further to $96.20/tn as the fate of the new US infrastructure stimulus seemed uncertain.
In the FX space, Sterling was sold-off in the short and medium term accounts after market expectation was roiled as BoE decided to hold rates steady. Flights to safe haven Swiss, Yen and Dollar were the order of the day as the comdolls trio were offered. Long term sentiments were little changed. Markets look for US employment figures on Friday, alongside earnings reports from Berkshire Hathaway (BRK/A), DraftKings (DKNG), Goodyear (GT) and Vistra (VST) to name a few.
OUR PICK – No New Pick
No new pick going into the weekend. Rising labor costs and falling productivity came as a surprise today for many players that have sent the precious metal complex back in firm bids. With employers having difficulties to hire and wages being increased to attract workers, rising labor costs were imminent and inflation might get elevated and linger longer than expected.
Inflation now (5.4% annualized) is way off Fed’s target (2.0%) since last April and with $15b tapering, Feds would complete rolling back the stimulus by June 2022. If all goes well, the earliest rate rise we see is in September, though more likely in December. Bank of America projected four more hikes in 2023. Until then, the equities markets will continue with outflows as leveraged accounts look to cash out. Have a wonderful weekend!
Trades updates:
Equities: Currently we are holding 8 stocks – 7 longs and 1 short. We are long AUY (18% undervalued) with dividends yielding 2.99%, T (19% undervalued) at 8.39% yields and COG (CTRA) (13% undervalued) yielding 2.30%. CLVS is currently 19% overvalued with -7.19 z-score but Tudor Investment had stepped in recently and we decided to hold. We remain bullish with VIPS (44% undervalued with 5.59 z-score), GT (47% undervalued with 1.28 z-score) and CRON (15% undervalued with 9.18 z-score) while bearish GE (17% overvalued with 1.43 z-score).
FX & Commodities: We have no new pick until after NFP Friday.
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.