US Non-farm Payrolls are higher than expected. The economy added an impressive 272k new jobs in May, compared with 165k in April, which was higher than the average gain of 232k in a rolling 12-month average.   As a result, investors think the Federal Reserve (FED) will delay moving on rates. The odds of a rate cut in September moved from 68% to 55%. Other economic data in the US that came out last week supported the employment numbers and suggested that the US economy is not doing too badly. As a result, traders took the equity markets to new record highs. Precious metals markets, especially Silver, were hammered in the wake of news that the PBoC was halting purchases of gold, and the US placed a 50% tariff on solar cells from China. Solar cells are among the biggest uses of silver. In Australia, the economy is slowly grinding to a halt. GDP numbers QoQ saw a drop of 0.2% and YoY a drop of 0.5%. This doesn’t look good if inflation remains elevated, with the RBA looking at keeping rates high and potentially lifting rates. 

But first, to the US Jobs data. The latest US non-farm payroll data has surpassed expectations, with the economy adding an impressive 272,000 new jobs in May. This figure compares favorably to the 165,000 jobs added in April, exceeding the average monthly gain of 232,000 over the past 12 months. Further, manufacturing payrolls continued to climb, adding on last month's gain by an additional 8000 jobs, showing good signs that the sector is weathering the high cost of money.  However, average hourly earnings MoM +0.4% and YoY 4.1% exceeded expectations. This robust job growth has led investors to speculate that the Federal Reserve (FED) may delay any moves on interest rates for the time being, something that this report has been suggesting for some time. The probability of a rate cut in September has decreased from 68% to 55%. In response to the strong employment numbers and other supportive economic data released last week, traders have driven equity markets to new record highs, which seems counterintuitive if rates will remain higher for longer. The data suggests that the US economy performs better than anticipated, reinforcing investor confidence and driving market optimism. So, how has the second-largest economy faired of late? 

Investors have been looking for the economy to pick up on the back of PBoC implementing stimulus programs to help kick-start the flagging economy. The latest Caixin Manufacturing Services and Composite PMI data all suggest that the economy has started to show signs of recovery and is maintaining this growth. Manufacturing early last week showed more robust growth than the previous seven monthly leads and topped expectations, coming in at 51.7. It was the seventh straight month of expansion. Further, the Services PMI also came in better than expected at 54.1. The forecast was 52.2. It was the 17th straight month of expansion in services activity, marking the fastest pace since July 2023. New business and new export orders grew the most in a year due to strengthening domestic and external demand. Employment increased for the first time in four months, with its fastest growth rate since September 2023. Hopefully, this week's inflation data supports signs that price pressures are picking up. YoY expectations are for an increase of 0.2%.  The previous MoM data was +0.1%; however, forecasts are not that encouraging, and a positive read would be needed to suggest that the stagflation is ending.

In Australia, we are seeing a deteriorating economy. The economy expanded 1.1% year-on-year in the first quarter of 2024, easing from a revised 1.6% growth in the previous quarter and coming below market forecasts of a 1.2% rise. It marked the slowest economic expansion since the fourth quarter of 2020 and has been gradually declining since peaking at 5.7% in October Q3 2022. Similarly, the MoM read showed a gain of 0.1%, the lowest read since Q4 2022. Combine this with the latest inflation data, which remains stubbornly above 3.6%, prompting the RBA Governor to suggest rates will be on hold for longer and may even go up. Although inflation is headed in the right direction, it's not fast enough, especially whilst GDP is so low, being a fraction away from zero or negative growth. The RBA has a few tough calls to make, a deteriorating economy caused by high interest rates and beating down inflation. We expect the RBA to sit on its hands even though other central banks have started easing.

What can we expect this week? In the United States, the Federal Reserve's interest rate decision and economic projections will take centre stage. Investors will also pay close attention to CPI and PPI inflation data and the Michigan consumer sentiment index. Globally, the May inflation rates for China, India, Brazil, and Russia will be of significant interest and we have more central banks talking about easing monetary policy.

On the position front, we remain … in the S+P (…, …); we continue to unwind positions. We are … at … in the ASX and have added at … at a daily close above … we will review the position. We are still … USD/JPY at … and at ... Currently …, the AUD/USD (US…) and AUS/CHF (…); we have been stopped out of the … Gold and Silver positions for a small gain.

Trade Focus:

Fundamentals:

Gold, CHINA’S central bank did not buy any gold last month, ending a massive buying spree that ran for 18 months and helped push the precious metal to a record high in May…

Technical Analysis:

Technically, the selloff was dramatic, and stop-loss orders have been triggered. Before coming back to the market, we are looking for confirmation that a low is in place…

Support              …

Resistance         …

Momentum        …