Market volatility settles, on the lack of trade-war news

Market volatility settles, on the lack of trade-war news

The fear and volatility that’s characterized this week’s trade was largely absent overnight. And that’s because meaningful trade-war developments were lacking – though, it must be said, the Trump administration still appeared keen to drip-feed good news to the market. Wall Street traded flat-to-lower overnight, and that’s setting up the ASX 200 for a soft start, off the back of a day that saw broad-based climbs for the Australian stock market. Retail Sales data dominated the local session’s headlines, and roundly disappointed, sending the AUD lower. And in the day ahead now, interest turns to the release of US Non-Farm Payrolls tonight.

Neither a night for risk-taking, nor safety-searching

Volatility in markets dropped last night. The VIX dipped very slightly, holding on to the 14-level – a mark generally considered a positive signal for risk-taking. European stocks dipped it must be said, but US equities managed to hold quite steady, and that’s setting up the Asian for a middling start. The currency landscape was mixed. The Yen and USD were slightly lower, while the Pound continues to rise on Brexit-related optimism. Global bond yields edged a little higher, but gold held steady, thanks to a weaker Dollar. And oil prices climbed, as traders places bets that OPEC+ will announce production cuts at its meeting this week.

US President Trump still keen to pump the markets

US President Trump seemed to do his best to keep the market bullish overnight. The argument as to why the US President wants to pump the stock market is reasonably cogent: he needs a strong economy going into the 2020 election, and the American economy is practically sustained by keeping the value of financial assets high. In a vague statement to the media, US President Trump stated: trade talks are “going well” and “something could happen regarding 15^th December tariffs… but we aren’t discussing that”. The commentary provided a small lift to stock prices, on what was an otherwise quiet session for global markets.

ASX200 recovers ground, set for a soft start

Wall Street’s flat-ish close is setting up the ASX for a similar open this morning. It comes off the back of a reasonably solid recovery in stock prices yesterday, of course, on signs that US and China trade-talks remain on track. For the tech-heads, too: the bounce in the market yesterday came just about bang on a pretty meaningful trendline – one that’s defined, more-or-less, this years market uptrend. In more granular news, it was the banks that lead the charge higher yesterday, after markets took kindly to the RBNZ’s planned increases in the reserve capital requirements for financial institutions in New Zealand.

Local retail sales numbers disappointments markets

Retail Sales data topped the news flow locally, yesterday. And while hardly catastrophic, the print was a bit of a shocker. Retail consumption was flat last month, against what was a forecast expansion of 0.3%. Backing up the signals received out of Tuesday’s RBA meeting, and Wednesday’s GDP figure, the Australian consumer is in a tough spot. At that, such is the lack of confidence right now, that households are resisting spending the tax cuts and interest rate cuts that have flowed to their bottom-line. It would appear more stimulus is required, with the market upping the odds of a February RBA cut.

Odds of RBA cut increases, weighing on Aussie Dollar

The chances for an interest rate cut from the RBA in February is about 66% right now; with another cut after that next year a fifty-fifty proposition. The lukewarm outlook for Australian economic fundamentals is keeping traders broadly in the camp that much more needs to be done by the RBA for the economy to reach full employment and target inflation. This general dovishness, if you will, has kept a lid on upside in the Australian Dollar, which, despite finding some buying support from hopes from improvements in the global growth outlook, and a slightly weaker USD, remains stuck in a firm downward trend.

US jobs numbers to provide US economic health-check

The next 24-hours in global markets will be focused – barring some extraordinary trade-war development – on the release of US Non-Farm Payroll data tonight. The jobs numbers are expected to print rather strong: a gain of 190k jobs to the US economy last month. That ought to be enough, it’s estimated, to keep the unemployment rate at 3.6%. There’s still a level of wariness regarding the fundamental strength of the US economy, and whether the considerable slowdown in business activity within it could be dragging on hiring. A solid print tonight will reaffirm the prevailing view that the US economy is humming along at a moderate tick.