The Morning Jumpstart Macro view

OVERNIGHT MARKET SNAPSHOT FOR WEDNESDAY 5/05/21 (as at 7:15am AEST)

  • SPI200 (Jun) overnight futures down 26 pts to 7009
  • SP500 down 28.00 pts to 4164.66
  • NASDAQ Composite down 261.62 pts to 13633.50
  • Dow Jones up 19.80 pts to 34133.03
  • FTSE100 down 46.64 pts to 6923.17
  • DAX30 down 379.99 pts to 14856.48
  • GOLD futures US session (June) down $13.20 to $1778.60 an ounce
  • COPPER futures US session (Comex July) up $0.0295 to $4.5580 a pound
  • OIL futures US Session (Nymex Jun) up $1.20 to $65.69 a barrel
  • CRB Index up 1.60 pts to 202.45
  • AUDUSD trading at 0.7713
  • EURUSD trading at 1.2012
  • GBPUSD trading at 1.3887
  • USDJPY trading at 109.3200
  • USD Index US Session (ICE Jun) up 0.322 to 91.293

US indexes were pressured from the open after a fear based selloff in the European session flowed over into the US. Indexes opened weak and headed south after comments from Yellen rattled markets. Tech was the main focus for trader selling which weighed on the SP500. She said that ‘interest rates may need to rise modestly to prevent the economy from overheating’ which triggered an immediate reaction across the board from traders in a risk off move. Shares and risk were unwound quickly with Gold taking a hit along with currencies reacting to the comments. She later clarified earlier remarks, potentially after a tap on the shoulder from Biden and the Fed, which triggered a bounce to recover some of the losses. The move shows the fear that is linked to a rate rise which we believe is inevitable…but the question is when not if. Expect that the FED may again confirm their stance on interest rates ahead of Fridays employment data to sooth the market that rate rises are off the cards for a while yet. The DOW closed up 0.06% while the broader SP500 ended down 0.67% and the Nasdaq closed down 1.88% for the session. In Europe, major Indexes were hit hard on the back of the Yellen comments in a risk off move. The DAX was mauled lower with tech being the focus and pushed down through support to end on lows into the close. Expect that there may be some bargain hunting on the open after the comments were re-iterated by Yellen after the DAX close. Bond prices saw a safe haven bid on the back of the share market selloff and managed to hold the gains on the bounce in the US session.

The USD Index did not react as much as the indexes in European trade but did see some chop. Price was already on the rise ahead of the comments and held the gains into the US close and did not see a safe haven bid as would have been expected. We feel that the earlier move was due to some position and rebalancing ahead of the key US employment data Friday. Resistance for now is at 91.400 and minor support from the higher low at 91.160 which is the anchor to the move up. The EURUSD already moved down into support around 1.2000 prior to the risk off move in equities. Support held for the rest of the US session as the USD held onto the gains. We will be watching for a flush of the support to target stop losses below but do expect no follow through for now. The GBPUSD was choppy ahead of the BOE statement Thursday where traders will be looking for any easing of QE as the economy recovers. Price was held down around 1.3893 after a few failed pushes lower. Expect there will be more chop ahead of the statement but price is starting to look like it is setting for a move up. The AUDUSD was pressured lower with the hit to stocks even as commodities were generally stronger across the board. The RBA decision to leave rates low for a lot longer may weigh on the AUD but for now price is holding support around 0.7700. The USDJPY managed to hold up off support around 108.970 as the USD rallied through the Asian session and into European trade. Price later retested and held the level which we expect to see lead to a move up through 109.470 if the 109.200 level holds. If the 109.200 level fails and sellers pressure lower, buyers may start to get squeezed but this will depend on the USD which is struggling for direction as bulls and bears fight it out.

SPOT GOLD ramped back into the highs around 1797 before taking a hit as the US opened weak. Price pushed back down to give up the gains but Gold is consolidated above 1765 which is a good sign for bulls. Price may still have some work to do to build support off 1770 but we still expect some strength to come into the action as Bond prices look to head higher. The action may be muted or choppy ahead of Fridays US payroll release. Crude Oil was not phased by the rate rise concern (why would it with an expanding economy) and took it as a positive to rally into the US close. Price has now extended into the $66 level where we may see a reaction from sellers although price could just as easily continue the push a bit higher into 67.90 highs from March before some heat comes out of the action and buyers lock in some gains. Oil inventories out tonight could be a big factor which may cap the recent bullish action. Copper also continued to add to gains and looks very positive from a price action perspective. We expect to see the rally extend higher in coming sessions and for the anchor to the uptrend at 4.5005 hold to support the bulls. Major resistance may come in higher at 4.6510 which is a daily level from way back in Feb 2011.

Cryptocurrencies took a knock on the head on rate rise concern as the Ethereum rally stalled seeing some profit taking from recent buyers. Bitcoin took a hit and is trading down at $54336.57 down 5.04% while Ethereum is at $3324.88 down 3.09% and Ripple is at $1.43207 down 7.97%.

The ASX200 bulls lifted their game yesterday and managed to end the session with some handy gains and continue the pressure up. The index ended the day up 39.1 points to 7067.9 as price consolidates above the 7000 market setting for a run into new all time highs. Leading the charge were Gold stocks, Metals and Mining, Resources and Materials while IT and Financials ended down. The RBA kept rates on hold and mentioned that they expected it to remain at the same levels well into the future while upgrading the 2021 economic growth forecast to 4.75% from 3.5%.

The ASX200 is expected to open down 20 points after the SPI200 took a hit along with other indexes on Yellen interest rate comments.

ECONOMIC DATA OUT TODAY (AEDT)

JPY Bank Holiday

NZD Employment Change and Unemployment Rate 8:45am

AUD Building Approvals 11:30am

EUR German Final Services PMI 5:55pm

EUR Final Services PMI 6pm

EUR EU Economic Forecasts Tentative

USD ADP Non-Farm Employment Change 10:15pm

USD ISM Services PMI 12am

USD Crude Oil Inventories 12:30am

SPI200 INTRADAY LEVELS TO WATCH