The “purple patch” continues in the US. Equity indices are on record highs, Meta shares jumped 20.32% after its first dividend and posted its biggest rise in a quarter, Amazon jumped 7.87% after a 14% rise in revenue and the US economy added 353K jobs last month nearly doubling the projected 180K while the unemployment rate held steady at 3.7% and wage growth unexpectedly accelerated. The ISM and PMI data out this week will be a key focus for the Fed who will be closely monitoring data for signs that rates in the US can be eased. In Australia, this Tuesday at 2:30pm, the RBA delivers its interest rate decision and holds a Press Conference on its thoughts later in the day. Although we expect little change the key will be in the wording. Oil tracked a 6% decline for the week, on the back of an IMF report indicating that the Chinese economy will continue to ease out to 2028 further softening demand for the commodity. Talk of a potential cease fire in the Middle East is adding to the weakness.
But first the “purple patch” in the US. We have no futures positions in US equity markets. Opting to stick to the sidelines after shutting down shorts early last week small profit but glad we did this. With all this positive news you must wonder whether or not to add to stock holdings in the US in portfolios. The FED after last week’s robust earnings reports will be focused on this week’s round of corporate announcements and economic numbers. The US Jobs data was good and further positive announcements from Corporate US will spark a response from the Fed in terms of pending interest rate cuts. A strong US jobs report is a critical factor that can sway the Feds decisions regarding interest rates. It reflects the overall health of the economy, labour market conditions, and potential inflationary pressures. The Fed's primary goal is to strike a balance between fostering maximum employment and maintaining price stability, and a strong jobs report plays a pivotal role in shaping its policy direction.
Both the ISM and PMI are leading indicators for the Fed. These data sets will provide the Fed components related to input costs and prices paid by businesses and how business will respond to employment. All important for the FED when looking at forecasts for inflation and guiding monetary policy. Both reads are expected to be better than last months with the ISM edging up to 57 and PMI 52.3 up from 50.9. This is a concern on the inflation front. The Fed has mentioned continuously that it is concerned about how stubborn the current core inflation rate of 3.9% is. Market has factored in an expected cut in rates, however if these numbers are as forecast then the possibility that rates will come down will be pushed further out. The market is yet to factor a delay in so if the numbers are good, we may get a change of colour in the “purple patch”.
Domestically, it’s a different story on rates for a couple of reasons, but first the RBA will meet Monday rather than Tuesday with two 3.5hr sessions each day with the overnight giving board members a chance to reflect on the data. The statement may be a little more reader friendly, but this is expected to create more noise and thus the market reactions maybe more volatile. But apart from the meeting changes, the RBA will reflect on the last inflation data which was softer at 4.1% although it’s a good number the core inflation is still stubbornly high being outside the 2%-3% band and thus, we expect the RBA to keep interest rates stable at 4.35%. The bond futures market is pricing in 2 x 25bp cuts this year. The equity markets may be disappointed in this and we may see a little selling pressure.
Oil has been under pressure all week. Looks like our bullish call last week also rang the bell for the bears. The commodity has dropped 6%, based on a series of events all looking to keep the price of the commodity under pressure. Talk of a ceasefire in the Middle East with the chances of some form of resolution may be on the card, Iran expressing its deep regret over three US service man killed in action by Iranian allied militants, helping to reduce chances of the conflict spreading and finally the IMF reporting that Chinese economy is projected to remain under pressure with GDP growth dropping to 4.6% this year, down from its 5.2% growth in 2023, and to fall further to 3.4% by 2028 . All points putting pressure on the oil price. We expect prices to remain volatile with any news out of the Middles East helping to dictate its direction.
In summary, traders should be expecting more volatility especially around key data points the ISM and PMI out of the US on Tuesday and RBAs decision on rates the same day are a key focus. Then on Thursday we have Chinese inflation. The forecast is for deflationary conditions to prevail. With the YoY release coming in at -0.4%. This will chalk up the fourth fall in as many months and the longest period of deflationary pressures since 2009. The PBoC continues to inject stimulus albeit the market is yet to see positive signs that the stimulus programs in China are working. Ramifications that have not yet been factored in by traders.
On the position front, we remain … the SPI with a small, … position (7505). In the currencies still…both the AUD/USD (US0.6770) and AUS/CHF (0.5707). Commodities, in bullion market … Silver (US23.19) with … position in Gold (US2046).
Trade Focus:
Fundamentals:
Silver: We continue to support the silver trades so in this week’s report we opted to take another look at it. Silver prices tend to have an …
Technical Analysis:
From a technical perspective Silver is …
Support …
Resistance …
Momentum …
