Will Strong Employment Report Outweigh Global Economic Concerns?

Andrew Cummings
March 10, 2019

Chinese stocks fell the most in almost five months after the nation's biggest brokerage issued a rare sell rating on the People's Insurance Company (Group) of China, likely signalling the government's desire to slow a market that has outperformed global rivals over the past two months. The pressure looked to continue on Wall Street, with S&P 500 E-Mini futures easing 0.4 percent.

ECB President Mario Draghi said the economy was in "a period of continued weakness and pervasive uncertainty" as he pushed out a planned rate hike and instead offered banks a new round of cheap loans.

The mood had already been brittle after the European Central Bank slashed its growth forecasts and surprised everyone with a new round of policy stimulus, leaving investors fearing the worst for the global economy.

Yet the cocktail of growth woes and dovish central banks proved a boon for bonds.

"Our initial take is these developments are pressing down on market confidence, seen in lower bond yields and equities".

It also threw a spanner in the works for investors in the region particularly Shanghai who had been chasing a rally fuelled by optimism that China and the United States will hammer out a deal to end their trade war. Italy's 10-year government bond yield touched its lowest level in just over a month at 2.661% and was last down 4 basis points on the day. A weaker-than-expected report could send prices sharply higher as this news would likely drive the Treasury yields and stock prices lower, weakening the dollar.

The news saw the euro slip against the U.S. dollar and the Swiss Franc. Nonfarm payrolls may have increased by 180,000, while the jobless rate fell to 3.9%, according to estimates.

Y is hanging near a 3-month high hit in Thursday's session, while Euro holding close to a 21-month low Vs US after the European Central Bank postponed an interest rate hike until Y 2020.

With the Federal Reserve's monetary pivot already priced in, some investors are wondering if the dollar's recent gains could become more sustained.

The dollar index against a basket of six major currencies was a shade lower at 97.515.

The Japanese yen advanced 0.4 percent to 111.12 per dollar.

The ECB's board did lower its growth projections to 1.1% for 2019, down from 1.7% projected in December 2018. "That is not good news for euro area banks or the euro". So far, oil demand has remained steady, where imports of crude oil remained above 10 million barrels per day (bpd).

Spot gold rose 0.6% to $1,292.52 USA per ounce, while US gold futures gained 0.5% to $1,292.90 U.S.

US crude was last down 35 cents at $56.31 a barrel, while Brent crude fell 49 cents to $65.81.

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