Financial Analyst/Content Writer, RADEX MARKETS
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
AZIONI
Last Friday’s NFP report sent shockwaves throughout the financial world and proved that the publication still has the weight to aggressively move markets. The headline figure came in at 172 thousand new jobs in May, more than doubling predictions of 85 thousand, while the unemployment rate remained stable at 4.3% and the more encompassing U-6 unemployment rate ticked down to 8.1%. Moreover, prior figures for March and April were revised to the upside by a combined total of 93 thousand. Suffice to say the report took markets by storm, violently changing expectations with regards to interest rate cuts and everything downstream of such. If the US labour market does indeed continue to demonstrate this degree of resilience, then the Federal Reserve only has one question to address: inflation. Given recent data provided by the CPI and PCE price index, inflationary pressures in the US economy are nowhere near desired levels, rising closer to 4% than the 2% target the Fed would like to see. This suggests that the Fed may well be forced to enact a rate hike, and everyone knows it.
The implications of a stronger dollar immediately rippled through currency markets last Friday, bumping the DXY back over 100 by the weekly close. The euro dropped 0.75% to revisit $1.152, returning to levels last seen in early April. Cable fared slightly better, losing 0.6% against the greenback and returning to $1.333. The yen proved the more stable of the major currencies, nudging lower against the dollar but proving unwilling to be swayed too far after Japanese monetary officials stated rather bluntly that they would intervene at any time to contain excessive volatility. The Bank of Japan has stepped in to defend the 160 level before and may well do so again. Unfortunately, similar remarks from Korean authorities were not so forthcoming, prompting the won to fall to 1560 per dollar last Friday, an exchange rate not seen since the 2009 financial crisis. Said authorities, who obviously had a change of heart of the weekend, put out a statement early this morning to address the matter, largely reversing the damage.
Commodities got utterly hammered following the NFP release, causing gold to lose $150 per ounce on Friday and dragging silver down to an 8% loss. Gold, silver and platinum are back down to their March lows, while palladium has been crushed down to levels not seen since last September. All four precious metals are now in the red for the year, with silver incurring a 7% loss, platinum sustaining a 14% drop and palladium losing a quarter of its value since January. A strong dollar and higher for longer interest rates have absolutely destroyed non-yielding assets so far this year and metals are no exception.
US stocks were likewise hit with a deadly dose of reality, causing the Dow Jones, S&P 500 and Nasdaq Composite to decline 1.3%, 2.6% and 4.2% respectively. Capital fled the semiconductor sector like a sinking ship, leading to billions of dollars being wiped out across the board. Micron (MU) collapsed 13.3%; Intel (INTC), Sandisk (SNDK), Qualcomm (QCOM) and Western Digital (WDC) all plummeted 11% or more; Broadcom (AVGO) lost 8% and even Nvidia shed 6%. The harrowing losses carried over into the Asian session this morning, causing the Nikkei 225 to lose 4% from the get-go. The Korean stock market has already hit its first circuit breaker today and is facing losses of over 8%. Among the carnage, it is somewhat amusing that of all asset classes, cryptocurrencies are faring the best, having already been battered for much of the previous month.
This week’s economic calendar is unlikely to match up to last week’s drama, although there are a few notable events to keep an eye on. The first is the latest US CPI reading on Wednesday, which will no doubt contribute to the conversation surrounding interest rates. There are also a number of interest rate decisions from other central banks around the world, including the Bank of Canada on Wednesday, which is expected to maintain rates on the Canadian dollar at 2.25%, but also the European Central Bank, which is expected to increase deposit rates on the euro by 25-bps on Thursday. PPI numbers will chime in with their own take on US inflation later on the same day. Very little to talk about on the earnings front, with the exception of Oracle (ORCL), which is scheduled to report after market close on Wednesday. As if the tech jitters were not enough to spook Wall Street, fresh news reports of missile exchanges between Iran and Israel are beginning to emerge this morning, creating further chaos for financial markets going into this week.
About the Author
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
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