State of The Markets | Stocks Mixed As The Dollar Jumped Ahead of NFP


Stocks mixed as the Dollar jumped ahead of the NFP . US stocks closed mixed on Thursday after investors scooped some oversold bargains in the Dow (+0.46%) and S&P (+0.30%) after reports of better than expected jobless claims (232k vs 248k estimates). Economic data was mixed with productivity fell 4.1% and costs jumped 10.2%, sending the tech-laden Nasdaq (-0.26%) and the small cap Russell (-1.16%) deeper into the negative territories.

Demand for Dollar jumped near the 110 handle before pulling back to settle around the 109.60 mark as yields continue to rise on bonds sell-off across the board. As at writing, inversions between the shorter term 1Y (3.51%), 2Y (3.52%) and the longer term 5Y (3.41%), 10Y (3.27%) and 30Y (3.37%) remained to be seen.

In the commodity markets, crude remained under pressure as demand from China slowed down despite reports of reduced inventories. The black gold tumbled near the $86 handles before settling around $86.10/bl as New York closed. Similar fate engulfed gold and iron ore, where the precious metal continued its downfall below the $1700 handle while iron ore fell to below $100/tn for the first time in 10 months.

In the FX space, sentiments turned bullish as Yen and Swiss pulled back in demand while demand for Dollar, Loonie, Aussie and Kiwi remained elevated. Euro and Dollar continue to lead in the medium and long term, while Euro pulled back in the short term. Sterling remained under pressure as the UK continued to be in political uncertainty.

On Friday, traders may look to cash some profits ahead of the long holiday weekend as the calendar is light with only earnings reports from Global Blue Group (GB). Markets however will be paying close attention to the US non-farm payroll numbers and factory orders.

OUR PICK – No New Picks

No new picks going into the weekend. Another week of outflow from equities (-$3.61 billion), taxable bond funds (-$9.19 billion) and short term money markets ($-6.94 billion) as the Federal Reserve continues to stand with its plan for aggressive rate hikes. Markets on Friday however, are pricing 72% probability of a 50bps to 75bps hike in September, a little lower than 75% probability on Thursday; as if implying a weaker than expected NFP.

Trades updates:

Equities: Recent stocks rout pulled down M (47% undervalued, 3.69% yields), T (5% undervalued, 6.34% yields), AUY (23% undervalued, 2.82% yields), CRON (24% undervalued with 27.82 z-score) and WBA (36% undervalued, 5.45% yields). VIPS (34% undervalued with 4.73 z-score) however, jumped as Beijing and Washington reported a near deal for audit inspection of NY-listed companies.

FX & Commodities: USD/CAD and Crude Oil were stopped out. GBP/JPY reached medium term TP1 while NZD/CHF reached short term TP1 and we remain bearish NZD/JPY.

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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.