A combination of central bank accommodation and data that directly contradicts the “weakening US economy” narrative saw risk buying accelerate in Friday night trading. European and US shares jumped, and industrial commodities followed, as investors shunned safety and slammed gold, bonds and the Japanese Yen. Asia Pacific markets are looking to a positive start, but the commencement of China/US trade talks today will likely be a key short term driver of markets.
The return of optimism started with the Peoples Bank of China easing reserve requirements for banks on Friday. The sentiment change was illustrated by later market reactions to comments from Fed chair Powell, with commentators seizing on the Fed’s “data dependence”, despite the fact that this has been a staple of Fed messaging for at least two years.
However it was the numbers that counted. US jobs data showed 300,000 new jobs in December and wages growth accelerating to 3.2%. The stronger employment numbers dropped alongside a surprise lift in services activity, providing hard evidence that the US economy is not as weak as many investors feared.
Against this improving market backdrop a US delegation arrives in Beijing today for two days of trade talks. Global growth remains a major concern for investors. Expectations are low, but any signs of an easing of the current logjam will likely add to the short term reversal of negative sentiment.
CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
CMC Markets Singapore may provide or make available research analysis or reports prepared or issued by entities within the CMC Markets group of companies, located and regulated under the laws in a foreign jurisdictions, in accordance with regulation 32C of the Financial Advisers Regulations. Where such information is issued or promulgated to a person who is not an accredited investor, expert investor or institutional investor, CMC Markets Singapore accepts legal responsibility for the contents of the analysis or report, to the extent required by law. Recipients of such information who are resident in Singapore may contact CMC Markets Singapore on 1800 559 6000 for any matters arising from or in connection with the information.