News & Analysis

Stocks hammered – massive falls on Friday further carnage this morning; NFP – Interest rate fears cull bulls; USD soars – GOLD & AUD smashed

Feb 5, 2018 | Daily Market Outlook

Today’s high impact news:

▸20:30 GBP Services PM
▸02:00 USD ISM Non-Manufacturing PMI
▸03:00 EUR ECB President Draghi Speaks

U.S markets – took a hammering on Friday as interest rate fears cut deep into buyer confidence. Just astounding figures, the Dow Jones closed 666.75 points lower. The S&P500 lost 59.85 and the NASDAQ was flogged losing 144.92. Friday marked the first time since June 2016 that the Dow fell at least 500 points. The major indexes posted their worst weekly performance in two years. Friday’s higher than expected jobs data has set up a possible 3 further interest rate rises. The benchmark 10-year yield rose to 2.85 percent on the back of the report, hitting a four-year high. Investors have been jittery about the recent rise in interest rates, worrying they may be rising too fast. “The reaction in the bond market is due to the rise in average hourly earnings,” said James Ragan, director of individual investor group research at D.A. Davidson. “I think the market is now thinking of the possibility that the Fed could raise rates four times this year rather than three.” “The key for the market today is rising interest rates,” said Mike Baele, managing director at U.S. Bank Wealth Management. “The old adage is: ‘Bull markets don’t die of old age, they are killed by higher interest rates.’ That looms large.” Futures have started Monday very weak again the DOW mini is currently trading 174 points lower.

Oil fell on Friday losing 105 cents closing at $64.79. $66.07 continues to hold as a resistance point for buyers. Price has now developed a lower high.

European markets – broke hard on Friday closing sharply lower. The moves on the FTSE and DAX have been a lot deeper than in the US. The DAX closed 218.74 lower the FTSE lost 46.96 and the CAC was hammered losing 89.57. Deutsche Bank reported a net loss of about 497 million euros for 2017. Caixa Bank reported a 70% fall in quarterly profit. Looking at the GER30 and UK100 CFD daily charts, the GER30 crashed through 12582 on Friday, price fell to September levels eclipsing Januaries 670 point rally. This morning price gapped 80+ points lower, sellers hit a 12,527 low. Price has now retraced 1073 points since September 2017! The UK100 has lost 460 points since its Jan high. Sellers hit 7318 this morning levels not seen since Dec 2017.

Forex – Positive NFP figures and higher average earnings set the USD alight on Friday. The USD set strong gains to the CAD, JPY, GBP and AUD. The USD returned to safe haven status on Friday as shares and bonds plummeted. The AUDUSD had a shocker losing 120 pips and settling 181 pips lower for the week at .7919. Interest rates the main concern for the AUD atm. US rates going higher ours staying flat. The USDCAD surged adding 157 pips, the USDJPY closed 74 pips higher. The EURUSD and GBPUSD fell, the Cable lost 140 pips. The Japanese Yen closed lower to the majors apart from the GBP and AUD, the A/J lost 72 pips. The Aussie really looks buyer less at the moment. The EUR surged to the GBP on Friday adding 52 pips. The NZD had its worse session to the USD since October 17 losing 98 pips.

Gold didn’t fare well on Friday, the USD strength sent price $15.80 lower. Price settling back at January 23 lows. We’re starting to see several daily trends under pressure. Bitcoin continued its march lower hitting new 2018 lows. Sellers took price under 8,000 for the first time since November 2017. The low was short lived as buyers returned closing back above 8,000. Price is trading higher this morning, divergence is developing on Bitcoins daily chart.

US30 – carnage, price closing 700+ points lower. Further selling this morning could turn into a bear trap, we think traders should look to give this market some time to set up either a counter rally fade or a higher low. Price is currently in an extended position. 

Good trading from Eightcap.

Sources; CNBC.  All times are AEDST

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