Markets Week Ahead: Dow Jones, Nasdaq 100, US Dollar, Crude Oil, ECB, BoC, Treasuries
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Market sentiment was a mixed bag this past week, with a rotation out of growth and into value stocks witnessed. On Wall Street, the Dow Jones Industrial Average gained about 1.8% while the tech-heavy Nasdaq 100 shed roughly 1.91% off its value. In Europe, the UK’s FTSE 100 outperformed, gaining 2.27%. Japan’s Nikkei 225 was down 0.35%.
All eyes remained on longer-term Treasury yields. The 10-year rate continued to climb into new highs for the year, reflecting rising confidence in the broader economic outlook as inflation expectations are driven higher. Fed Chair Jerome Powell also appeared to be rather sanguine about developments in bond markets.
The US Dollar mostly outperformed its major counterparts, with the exception of the Canadian Dollar. Some of the worst-performing ones were the Swiss Franc and Japanese Yen. Taking a look at commodities, WTI crude oil prices soared, closing at the highest since 2018. Unexpected output holds from OPEC+ drove energy prices. Anti-fiat gold prices further weakened.
Ahead, traders will be tuning into the European Central Bank and Bank of Canada monetary policy announcements. The rise in longer-term government bond yields has not been mutually exclusive to the United States, those in Canada and Europe are also rising. As such, it will be key to see how central bankers feel about longer-term bonds and whether or not action is warranted.
Covid vaccinations have been driving the improving global growth outlook, but as nations open up, there is a risk that some may let their guard down. Traders will also be watching US and German CPI data for updates on inflation. Canada will release its latest jobs report, with Australian and United States consumer sentiment to also cross the wires. What else is in store ahead?
The US Dollar is moving higher after a blowout NFP report bolstered confidence in the US economic recovery. Markets will now turn attention to next week’s US inflation data which could boost the Greenback further.
Rising longer-term Treasury yields and a relatively sanguine Fed may place the Nasdaq 100 at risk as the Dow Jones holds up. Are growth stocks falling out of favor for value ones?
This Thursday’s meeting of ECB policymakers is live; there will be no major changes to Eurozone monetary policy but it could be tweaked in response to rising sovereign bond yields.
The recovery in longer-dated US Treasury yields may keep gold prices under pressure as the Federal Reserve appears to be in no rush to alter the path for monetary policy.
Supply constraints, rebounding global demand and rising inflation expectations may drive crude oil prices higher in the near term.
The British Pound continues to face downside pressure as corrective trades continue.
The Canadian Dollar could extend its recent stretch of gains considering potential that the Bank of Canada might signal QE tapering along with its scheduled interest rate decision due this week.
Given the size of the rally in the eleven months preceding the beginning of the current decline a broader sell-off looks warranted.
The US Dollar gained as much as 2.80% in less than two weeks – a stark contrast to the prolonged sell-off from last year. Is a bigger shift afoot as rates markets go awry?
Rising yields and US Dollar creates a weak environment for gold, which trades at a 9-month low.
No matter where you look, the Euro is under a great deal of technical pressure: versus the commodity currencies (EUR/AUD, EUR/CAD, EUR/NZD) or even against the Nordic currencies (EUR/NOK, EUR/SEK). In this week’s technical review, we’ll examine the damage wrought upon the three major EUR-crosses: EUR/GBP, EUR/JPY, and EUR/USD.
US DOLLAR WEEKLY PERFORMANCE AGAINST CURRENCIES AND GOLD
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