STATE OF THE MARKETS
Stocks mixed as sectors rotation continue. US stocks closed mixed on Wednesday, after Treasury Yellen clarified her remarks on rates hike. Tech Nasdaq (-0.37%) and small cap Russell (-0.31%) dipped deeper, while blue chips Dow (+0.29%) and S&P (+0.07%) climbed higher as investors continue to rotate out of technology to cyclicals sectors. Flight to bonds safety was noted as the 10Y benchmark yielded lower to 1.58% as New York closed.
Crude futures jumped to as high as $66.75/bl after EIA reported significant reduction in US crude inventories, before settled lower, below $65.15/bl; after investors took profits off the table prior to NFP Friday. As of this writing, gold regained earlier losses, continue to climb and test the $1,800/oz amid continued concerns on rising inflation and weaker Dollar.
Dollar rally was stalled after services PMI and ADP employment reported a disappointing figures, that benefits the Comdolls and Sterling for the short term. King Dollar advanced further in the demand territories for the medium and long term accounts, as investors continue profit taking activities in Euro, Aussie and Sterling ahead of the BoE rate decision on Thursday and NFP Friday. Yen was noticed to be synching across horizon as China and Japan re-opens post holiday. Long term remains bearish for growth as investors continue to be on defense.
OUR PICK – XAU/USD
On last leg up before yields have to rise. Rising concerns on inflation has triggered longs in precious metal complex in the last five weeks and we see another leg up, the last one probably, amid Feds that played down inflationary concerns. Obviously markets was not buying the mantra, as gold and silver went up and yields went down. At some point however, Feds has to admit, as have been nudged by Kaplan and recently Yellen; that rates can’t stay low forever. This summer meeting in June would be the the stage where markets expect yields to rise as bonds were dumped amid rising inflation. Investors are not willing to lend the money if bonds can’t beat inflation.
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