By ICM Capital
US stocks rose on Friday post an upbeat jobs report. President Donald Trump hinted to a strong jobs report, an hour earlier, by tweeting “Looking forward to seeing the employment numbers at 8:30 this morning”. The stock market faced choppy trading throughout the week due to the concerns of trade tensions and Eurozone instability. However, the Dow Jones Industrial Average climbed more than 200 points to cover most of Thursday’s losses. The S&P500 rose to a high of 2735, to settle near more than two-month highs. The Nasdaq Composite was the top performer, rising nearly 1.5% to conclude a second consecutive week of gains.
The dollar index rose on Friday as the strong jobs report raised the chances of a rate hike in the Fed’s next meeting. The US 10-yr Treasury yields climbed back above the 2.90% level, the highest in a week. However, the strength of the dollar failed to continue throughout the Asian session, as the dollar value is already pricing-in a high probability of a rate hike in May. The US economy added 223 thousand jobs versus 189 thousand expected, while April’s figure was revised slightly lower. The Unemployment rate dropped to 3.8%, the lowest since May 2000. Some analysts noted that the drop in the participation rate was the factor behind the drop in the unemployment rate. The Average Hourly Earnings rose by 0.3% MoM versus an expectation of 0.2%. The streak of the positive economic reports continued with the better-than-expected ISM manufacturing PMI which affirmed the strength of the Manufacturing activity.
The Australian Dollar rose to the highest level in five weeks against the United States Dollar post strong retail sales numbers. The Retail Sales rose 0.4% MoM in April along with Company Gross Profit which rose by 5.9% QoQ in the first quarter of 2018. More crucial data is ahead for the AUD, as we wait for the Reserve Bank of Australia interest rate decision tomorrow and the first quarter GDP figures on Wednesday. The RBA is expected to leave interest rates unchanged at 1.50% by the majority of analysts.
The Canadian dollar fell against the US dollar after a soft GDP reading. The first quarter, annualized GDP came out at 1.3% versus an expectation of 1.8%. The Loonie gained more than one percent post the bank of Canada meeting statement. However, most of these gains faded on the weak economic report and the rise in trade tensions between Canada and the United States.
Gold prices tumbled to a two-week low as the robust jobs report raised the chances of an interest rate hike in the next Federal Reserve meeting on June 13th. Despite the rise in geopolitical tensions and financial uncertainty throughout this year, gold prices faced pressure due to the rise in US Treasury yields. This factor faded in the past two weeks, as 10-yr Treasury yields fell from a high of 3.129% to a low of 2.71%, and gold was able to trade in a range between $1282 and $1307. However, the recovery in the Treasury yields drove gold prices down to the bottom of the range.
Crude Oil futures fell nearly 2% on Friday to complete a second consecutive week of declines. The West Texas Intermediate lost almost 8% in the past two weeks as investors expect a higher supply from the top oil producers. The OPEC and Non-OPEC ministers met in Kuwait on Saturday for an unofficial meeting, and they agreed that they should provide “healthy market conditions” to grasp investments to the energy sector. They also confirmed the need to offset the drop in supplies from different countries such as Venezuela. The Baker-Hughes, energy services firm, reported on Friday a rise in the US oil rigs to 861 last week from 859 prior.
Major Economic Events
|8:30||UK||Construction PMI (May)||52.0||52.5|
|14:00||US||Factory Orders (MoM) (Apr)||-0.5%||1.6%|
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