While we were focused on developments on the East side of the Atlantic last week (including the ECB meeting), the market’s focus is shifting westwards this week, with the May Federal Reserve meeting set to conclude tomorrow and the always-impactful Non-Farm Payrolls report on Friday.
The U.S. dollar had massive weekly gains against all majors. The release of the gross domestic product for the first quarter of 2018 beat expectations but did little for a dollar that had rallied all week. Dovish central bank rhetoric from the European Central Bank and the Bank of Japan have increased the anticipation for the U.S. Federal Reserve’s Federal Open Market Committee on Wednesday, May 2 at 2:00 p.m. EDT.
U.S. equity markets gapped higher Sunday night with the “Mission Accomplished” rhetoric bringing a calming. The U.S.-led strikes on Syria were done in conjunction with Britain and France and while some hailed the execution as perfect, the market clearly agrees. The question that remains is whether Russia will retaliate.
Stock markets have got off to a relatively positive start on Monday, despite the United States, UK and France carrying out targeted strikes in Syria over the weekend in response to the chemical weapons attack a couple of weeks ago.
Markets haven’t been behaving well with Thursday/Friday being the latest example. I’m not even sure it was the weak jobs number which came in at 103,000 despite expectations of 182,000. Supposedly the Ides of March always augur in bad weather which leads to a "less than" haul. We’ll see soon enough in 30 days whether the weather caused an outlier.
There are a number of key events this week but inflation and the path in which the Fed is tightening remains at the forefront. This has literally taken the stability and liquidity out of the market which in turn has made other situations, i.e. the trade war, have a greater and more immediate impact on market conditions. CPI, a leading inflation indicator, is due Wednesday morning at 7:30 a.m. Central.
This is one busy week and the main event, Friday’s jobs report, is set to close things out at 7:30 am CT. The focus has shifted away from job creation and is now on wages. While Non-farm Payroll takes the cake, this is a potent combination throughout the week. Kicking things off is ISM Manufacturing on Monday at 9:00 a.m. Central.
Federal Reserve Chairman Jerome Powell went to Wall Street and was not happy enough to enact whatever rate hikes the Fed had planned for this year, and markets were told to count on three more in 2019. Nobody knows what tomorrow or next month will bring, let alone next year. I came away thinking this guy is trying to pop the stock market bubble.
U.S. futures are coming under pressure once again ahead of the open on Thursday, as investors continue to display an anxiety about the path of interest rates against a backdrop of escalating trade conflicts.