News & Analysis

Dow shaken as yields return to focus; Oil drops 2.7%; AUDUSD remains in the .70s; NFP due tonight

Oct 5, 2018 | Market Updates

Upcoming high impact news:

11:30 AUD Retail Sales
22:30 USD Average Hourly Earnings – Non-Farm Employment Change – Unemployment Rate
22:30 CAD Employment Change – Unemployment Rate

Wild ride on the Dow overnight as yields continue to hurt buyer sentiment. The benchmark 10-year Treasury note yield reached its highest level since 2011, breaking above 3.2. As we saw in January this is igniting rate worries which are having a negative impact on stocks. The Dow dropped 356 points at its lows of the day and posted its worst decline since the 10th of AUG. The S&P500 lost 23.90 its worst session since Jun 25. The Nasdaq was hammered losing 145 pts, Facebook, Netflix and Alphabet all dropped more than 2%.

European markets closed lower, the DAX lost 43.44, the FTSE tumbled losing 91.94. Danske Bank dropped 4.6% following news that the bank will be investigated by the U.S. Department of Justice over a money laundering scandal. Brexit – reports that the U.K. could join a customs union within the European Union. Both Ireland and the EU have reportedly welcomed this proposal.

Oil turned overnight losing 2.7% after what has been a solid week in gains. Crude futures initially shrugged off a big increase in U.S. crude stockpiles and an announced production hike by top exporter Saudi Arabia. President Donald Trump’s deadline for oil buyers to cut off purchases of Iranian crude is just one month away and unsettling the market.

“The market was a bit over-extended on a short-term basis,” said Brian LaRose, senior technical analyst at ICAP-TA. “I would need to see both $84.35 and $82.85 broken (for Brent) to suggest that something more than just a minor rest stop in an ongoing uptrend is likely to take place here.” USOUSD closed 155 cents lower at 74.53. Buyers did test 76.35before selling accelerated.

Gold held gains into the NY session before losing demand and closing off highs. Price closed around $3 higher but finished well off session highs around 1206.40.

Risk had a mixed session to the USD, the EUR and GBP closed higher. The EUR snapped a 6-day losing streak adding 36 pips. The poor old AUD failed to find buyer interest despite better than expected trade balance figures closing 30pips lower inside the .70 handle. The USD added 58 to the CAD mainly on Oils sell off and the USD took a breather to the Yen losing 66 pips. The Yen finished lower to the GBP but made gains to the EUR and AUD. The AUD was smacked to the Yen losing 75 pips trading back in the 80 handle. The AUD has no friends atm.

Today traders will be looking at Australian retail sales coming out this morning at 11:30 am. As it’s the first Friday of the month US employment data will be released at 10:30 pm tonight. Any big beats to the upside could really shake this up with yields being a concern atm. What’s being expected are mainly lower figures – Average Earnings 0.3% and NFP 185K, both lower than last months figures.

Good Trading from Eightcap

 

Sources; CNBC – All times are AEST

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