After the euphoria of a more dovish Fed, equities got another boost today from an increase in trade optimism as President Trump advised that discussions were going well. US indices have experienced their best monthly increase in three years with tech stocks leading the way, the Nasdaq closing the month just shy of 10% up, the S&P and Dow not too far behind, both having gains of over 7%. Today’s moves were also assisted by strong earnings reports from both Facebook and GE. Currencies had a more subdued day with the dollar regaining some of yesterday’s losses in the majors, the Dxy currently trading around 95.60 although EM’s remain noticeably bid against the greenback. Commodities held recent gains with Gold trading above 1320.00 and Iron Ore finishing off a stellar month near 600/t, over 10% up.
Stock markets and risk trades have had a strong start to the year primarily assisted by a more dovish Federal Reserve Bank and resilient investor optimism, however there are still several factors that could slow progress. There’s no doubt that the trade conflict between the US and China has had a significant effect on sentiment and we’re now seeing its impact on data, despite reassurances from President Trump last night, the market will want evidence of real progress on current negotiations before confidence can increase. Brexit is still a major concern for the UK and Europe and once again markets are craving clarity on the way forward. On top of Brexit, European data has been disappointing for a number of months now with the ECB striking a distinctly more dovish tone and powerhouse Germany downgrading it’s growth forecast dramatically this month. Earnings season has been mixed and the majority of comments from the great and good at Davos were generally cautious to say the least. The market will be looking for evidence of strength in various economies as we move through Q1 and that will come from strong data prints and we kick of the month tonight with one of the most significant in the form of the US Jobs numbers. In light of all the above traders will be anticipating further volatility as we progress into 2019 and it could start tonight on the US data.
Looking ahead to the rest of today’s trading and we do have some interesting data before we hit the blue riband NFP’s early in the New York session. First up in the Asian session is the Australian PPI data but the main focus will be on the Chinese Caixin Manufacturing PMI data with expectation of further slowing coming with a 49.5 print. There a whole raft of European Manufacturing PMI numbers due out in the London session along with European CPI data, however the main play will be the Non Farms. Market expectation is for an 165k increase with the unemployment rate sticking at 3.9% and Average Hourly earnings dropping to 0.3%, anything far off of these numbers could see some sharp moves across the market especially as we move to thinner trading conditions towards the end of the day.