*Please note; The author is working from UTC +13 when determining the timeline of data releases.
Will the Non-Farm Payrolls (NFP) move the market this week? Or, has its importance been shifted to the side in the mind of investors and traders, especially as huge new global events draw the world's attention? Of course, I am speaking of the Russian invasion of Ukraine that began at the end of last week and has caused an extreme amount of volatility in the forex, commodity, and stock markets. With no diplomatic resolution in sight, the Russian/Ukrainian war is expected to continue to have an outsized impact on these markets.
Nevertheless, the US Federal Reserve will be watching the NFP figures with interest as they always do and folding the results into its justification to hike interest rates moving forward. As such, investors and traders should be keeping a cursory eye on the values, alongside developments in Ukraine.
The Federal Reserve is almost guaranteed to hike interest rates in its March meeting, its first in the post-pandemic inflationary environment. What isn't guaranteed is how much the Fed will hike. On the table are 25 basis points and 50 basis points. The NFP may impact the Fed's choice between these two options.
ADP Employment Change FEB
Leading up to the big NFP data release, we will have the precursor ADP Employment Change report for February to digest.
Last month’s data surprised the market when it reported a cut of 300K jobs in the private sector (vs an expected gain of 200K jobs). This month’s report may rebound with an expected 350K jobs added to the private sector
Non-Farm Payrolls FEB
Contrary to the ADP Employment Change report, the NFP reported a gain of 470K jobs in January.
The NFP For February is expected to report a 450K job gain. Combining an extraordinary Non-Farm Payrolls beat with other data points regarding the US economy recently might be the impetus the Federal Reserve needs to consider a 50-basis point hike seriously. Alarmingly, US producer prices rose 1% over January, the largest rise over the past twelve months, and lifted US PPI to 9.7% YoY
Block Inc (NYSE: SQ), the point-of-sale payment provider formerly known as Square, is reporting its Q4 2022 earnings this Thursday, February 24.
The usual market dynamic of ‘good report = stock price rise’ and ‘bad report = stock price fall’ may not be entirely appropriate to expect after the report’s release.
As we have seen over the past month, a favourable earnings report does not necessarily mean that the market will respond favourably in turn. For one, when Nvidia (NASDAQ: NVDA) reported its impressive Q4 2022 results on February 16, its stock proceeded to sell-off. As of writing, NVDA is down 12% since its earnings call as investors were all too happy to overlook its earnings beats and strong guidance for the next quarter.
On the flip side, an unfavourable report can sink SQ stock considerably more than at any time in the past. Investors have little patience for growth tech stocks at the moment, with US Federal Reserve rate hikes just around the corner and post-covid revenue surges seemingly coming to an end.
PayPal (NASDAQ: PYPL), a leading competitor of Block, reported its own Q4 2021 earnings report three weeks ago, on the first day in February this year. While PYPL beat earnings expectations, its dismal guidance for Q1 2022 has helped tank the stock price 46% in 2022, YTD.
As of writing, SQ is not far off PYPL’s shocking price retreat. SQ’s stock price has lost 40% of its value, YTD.
An unfavourable report may push this loss into the 50s or even the 60s. Tech stocks dropping more than 20% in a single trading day is not unheard of this year, as you may have seen Meta Platforms (NASDAQ: FB) trim 25% (USD 230 billion) from its market cap on February 3.
According to several investment banks and analysts, including Deutsche Bank, Credit Suisse, SeekingAlpa and MarketBeat, an even greater rout in the SQ’s share price may set investors up for a great long-term buying opportunity. SeekingAlpha and MarketBeat have price targets in the mid USD 200 range, which represent substantial upside potential.
Sign up today to trade SQ stock with BlackBull Markets
*Please note; The author is working from UTC +13 when determining the timeline of data releases.
This week will be excellent for gauging consumers' confidence from several critical global economies and their respective general robustness by proxy.
Besides the events detailed below, a quick note should be made on the loan prime rate decision from the People's Bank of China on Monday, which should pull investors' attention. The Chinese 1-year loan prime rate is currently set at 3.7%, and against the trend of most major economies, may still be trimmed.
US CB Consumer Confidence FEB
DE GfK Consumer Confidence MAR
The CB February report from the US is expected to show that confidence in the robustness of the US economy is shrinking. The main culprit for shrinking confidence is likely to be runaway inflation in the nation and perhaps a distrust in the fed's ability to react with the exact level of aggression needed to tame inflation.
Germany's consumer confidence report is also due Wednesday. The GfK March report is expected to show that Germans are growing in confidence in the economy. While still in negative territory, a rise to -4 from -6.7 points is expected, and with it, a possible boost in the confidence of the EUR over the long term.
The Reserve Bank of New Zealand's Interest Rate Decision is tucked away between Wednesday's confidence data. Much like the US Fed's interest rate decision due in a couple of weeks, talk concerning the RBNZ's decision centres on whether we will see a rate hike of 25 basis points or 50 basis points.
UK Gfk Consumer Confidence FEB
UK consumer confidence for February will be gauged on Friday afternoon. Like Germany, the UK's Gfk February report is expected to rise 3 points but remains negative as it moves from -19 to -16.
Like the US, inflation in the UK appears to largely drive the negativity in the confidence index. UK consumer confidence has been trending lower the past three months, so a reversal in the index value may be a bullish sign for the British economy and the GBP.
Several equities have reacted sharply over Tuesday trading to the suggestion that Russia is de-escalating its presence on the Russia/Ukraine border.
As reported by Reuters, Russia has begun to move an undisclosed number of its troops away from the Ukrainian border after completing mock defence exercises. Even so, tensions have not entirely dissipated. NATO, US, and UK officials remain cautious of the situation, with Boris Johnson noting that "the intelligence that we're seeing today is still not encouraging".
European Equities spent Tuesday rebounding sharply. The STOXX Europe 600, which is comprised of 600 stocks across 17 European exchanges, broke a three-day losing streak and rose 1.43%.
On an individual bourse level, the Italian stock market Index, the IT40, led the way back into positive territory, up 2.17% over the trading day. The German (DAX30) and French (CAC40) indices followed closely, each climbing ~1.9%, and the UK's FTSE100 climbed up 0.98%.
Naturally, commodities would be significantly affected by a war between Russia and Ukraine and NATO affiliated nations that have reacted the sharpest.
WTI and Brent have pulled back a shocking 3.7% and 3.4%, respectively. On Monday, Brent oil prices were pushing their way up to USD 100 per barrel after crossing USD 95 per barrel. Before the turnaround in the oil price, talk of USD 110 per barrel was beginning to filter into market predictions.
Russia and Ukraine are two of the largest exporters of Wheat. As such, supply concerns for the soft commodity have eased slightly, and with it, the price has pulled back from its two week high. Wheat is now trading down 2.63% to USD 7.8 per bushel. Low supplies could temper more downside for Wheat in Canada and the US.
To trade WTI, Brent, and US Dollar vs Russian Rouble, we welcome you to sign up today.
*Please note; The author is working from UTC +13 when determining the timeline of data releases.
Six significant inflation rate figures will keep investors on their toes almost every day of this week, with the most important data concentrated on Wednesday trading.
Bear in mind the expectations for most of the inflation data figures are strongly suggesting that inflationary pressure has already peaked. So, watch out for deviations from these hopeful expectations.
India Inflation Rate YoY JAN
The week opens with India's Inflation Rate YoY to January. The data is released on Tuesday morning, and the market is expecting India's Inflation Rate to rise to 6.0% from the current 5.59%.
The Indian Rupee is trading at a 7-week low against the US Dollar and a 3 ½- month low against the British Pound. The Rupee's weakness so far (and possibly to continue after Tuesday's data release) can be explained, in part, by the Reserve Bank of India less-hawkish stance than the US Federal Reserve and the Bank of England concerning raising interest rates. India's Inflation Rate hitting 6.0% isn't expected to radically alter the Reserve Bank of India's relatively less-hawkish stance.
China Inflation Rate YoY JAN
UK Inflation Rate YoY JAN
South Africa Inflation Rate YoY JAN
Expect three inflation rate data releases across Wednesday afternoon that may have the most considerable impact on this week's trading.
In order of appearance:
China's Inflation Rate YoY to January is forecast to fall from 1.5% to 1.00%.
The UK's Inflation Rate YoY to January is forecast to remain flat at 5.4%.
The direction that South Africa's Inflation Rate YoY to January is expected to head is contentious. The majority of the market expects the South African Inflation Rate to subdue a fraction of a percentage point from 5.9% to 5.7% or 5.6%. However, TradingEconomics is forecasting a rise to 6.0%.
Canada Inflation Rate YoY JAN
Canada's Inflation Rate YoY to January, released very early Thursday morning, is forecast to remain flat at 4.8%.
Thursday’s result may force investors to reconsider their exodus from the Canadian Dollar last week, as US Inflation hit a 40-year high and expectations for an aggressive US Federal Reserve response heightened.
The same forces could be in play this week but in the opposite direction. The Bank of Canada is on the edge of a more aggressive stance and hotter than expected inflation could essentially guarantee that it enacts its first post-pandemic interest rate increase on March 2.
Japan Inflation Rate YoY JAN
Closing out the week is Japan's Inflation Rate YoY to January, released mid-day Friday. The market consensus is a mild increase to 0.9% from the current Inflation Rate of 0.8%.
As Japanese companies are extremely slow to hike prices, Japan's peak inflation may lag other nations and continue to rise above 0.9% in the ensuing months. For one, the Bank of Japan is expecting inflation to hit 1.1% YoY to April, but still well under the Banks target annual inflation of 2.0%. Consequently, the Bank of Japan is expected to maintain its ultra-loose monetary policy and its -0.1% short term benchmark interest rate for the foreseeable future.
As such, it might be a shock for the Japanese Yen to improve its position from its 5-year low against the US Dollar.
Gold is back on the upside, trading at $1,710/oz after a 3 day losing streak as the US Dollar weakens. After hitting a peak at $1,731, gold lost some of its momentum, but is now looking to repeat its pattern from a few weeks ago. The yellow metal has been making sharp gains since the start of the month, rising to hit $1,725 before experiencing a short sell-off due to being gatekept by the strength of the US Dollar, as well as the shortage of physical gold in New York. However, that was short lived as gold was able to surpass its previous high in just a matter of days. Therefore, this current price can be seen as simply a repeat of its previous movements, as evidenced by the fact that it is moving to the upside once more, albeit slowly.
On a monthly timeframe, gold is nearing the $1,750 resistance level that it crossed back in late 2012, as seen in the chart below.
This is the next big step for gold, and if it breaks $1,750 definitively, it is then also not unreasonable to suggest that it could reach $1,800/oz in a matter of months. Back in March, Goldman Sachs predicted that gold would reach $1,800 in the next 12-24 months. Now an $1,800/oz figure is looking possible before the end of the year. A breakthrough of this resistance level would prove that appetite for gold is still strong, and that a strong US Dollar is still not enough to curtail the strength of this safe haven.
Factors currently pushing down demand for the USD include stock futures rising, increasing risk appetite slightly. Other currencies have also picked up strength, such as the Japanese Yen, which is currently trading at a 6 week high against the greenback, as well as both the Aussie and Kiwi Dollars rising as well, as detailed in my post yesterday.
No matter what happens, it would be wise to continue to keep tabs on gold as the economic situation progresses.
Anish Lal here at BlackBull Markets analysed gold in today’s Trade in 60 seconds video, which you can view below.
The Australian Dollar has seen a resurgence in recent days, following its massive drop mid March. At its lowest, the Aussie had traded at 0.5749 against the USD, but has steadily been climbing back up, and is now at 0.6482 and continuing to climb. Moving ahead, AUD/USD has a strong support at 0.6439, which gives further credence for it to keep rising.
Likewise, the New Zealand Dollar has also made a comeback, although not to the same level. The NZD/USD pair is currently trading at 0.6039, lower than its neighbour. This is most likely due to the difference in the severity of the lockdown between the two countries. For the past month, New Zealand has been in Level 4 of its COVID-19 alert phase, which meant that the entire country was under lockdown. Of course, this has meant that the economy has been under severe strain. While New Zealand has now moved back to Level 3 as of today, with over 400,000 workers returning to their jobs. That's almost 10% of the population, which will undoubtedly give a boost to the Kiwi Dollar, but many businesses still remain closed.
On the contrary, while Australia has also been in lockdown, it has varied by state, and overall has been less restrictive than New Zealand’s. For example, while in New Zealand people have not been allowed to leave their homes unless they were essential workers or for exercise, Australians can still order food, and shop for some non-essential items. This has allowed the Australian economy to not suffer the same level of stress, and thus is most likely the reason why the Aussie has made larger gains over the past few weeks.
While it is still uncertain how long Australia’s lockdown will last, the effectiveness of its lockdown has given investors hope in the strength of the Aussie Dollar. While the coronavirus may have impacted the Australian and New Zealand Dollars in the short term, the fact that they have been able to effectively stop the virus from spreading any further gives hope for investors that their economies will be able to recover sooner and faster than other countries.
With the Level 4 lockdown now over in New Zealand, our team of analysts are now back in the office and ready to resume our usual content. This means we will no longer be livestreaming on YouTube, but we will be uploading our daily Trade in 60 seconds videos again. For our first day back in the office, we talked about the Aussie dollar, which you can see below here:
UK Consumer Confidence was unchanged from its 12 year low, according to a survey by polling firm GfK done for the first two weeks of April. After last month’s figure of -34, the lowest it had been since February 2009, the number figure remained the same as UK citizens await the end of the lockdown.
Consumer confidence data is a measure of peoples’ willingness to make major purchases. The lowest figure ever recorded for UK consumer confidence was -39, a figure reached during 2008, during the global financial crisis. The current figure is obviously due to the inability for consumers to make purchases beyond necessities, but it is also due to the fears surrounding the current economic climate and the loss of jobs.
Despite this news, the Pound remained steady for the day’s trading, currently at 1.2350 for the Asian trading session. On the technical side, it fell through the 1.2460 support level from when we last looked at the Pound, and is now looking to trade between 1.2380 and 1.2280.
The lack of any major movement from the Pound is most likely due to the lack of change in the consumer confidence figure, even though it continues to be the largest ever decline. In March consumer confidence had dropped by a stunning 27 points. As for this month's data, analysts at GfK are still hesitant to say whether or not this figure is now stabilised due to consumers becoming adjusted to their lockdown lives, or if further lows are possible.
Investors trading the GBP/USD pair, as well as other Pound currency pairs, are most likely also waiting for the UK Retail Sales report for March, which is due later today.
UPDATE: the UK Retail Sales data has just been released, with a fall of -5.1% for the month of March. This figure exceeded predictions of -4.0%. The Pound has reacted by moving back towards a low of 1.2300. It is currently at 1.2325 against the US Dollar and looking to trade lower.
We are continuing to stream live on YouTube every day 10.00 am GMT. Today’s stream will most likely include the data from the Retail Sales report, and the subsequent movements on the Pound. Come join us and ask us any questions you may have. If you missed our last stream, you can watch the recording below:
US stocks have not seen any major changes this week, staying uncharacteristically calm despite headlines such as the oil price crash. The Dow Jones gained 457 points on its Wednesday session, a jump of 2%. It is now trading at 23,400 points on the hourly chart. Likewise, the S&P 500 and NASDAQ indices saw similar gains, climbing 2.3% and 2,8%, respectively.
However, this is most likely as investors are also still awaiting news such as this week’s jobless claims data. Latest predictions expect around 4.2 million new unemployment claims to be filed, bringing the total up to 26 million claims in just 5 weeks.
Likewise, the US Senate just passed another bill to aid in the fight against the coronavirus in the State. After weeks of negotiations, the Senate passed a $500 billion bill in order to help small businesses, and it is expected to go to the House of Representatives later this week. This news did give some relief to the stock markets, as they now look to extend their gains for the second session in a row.
But there are reasons to continue being bearish about the stock market. Investors are vying for stocks to gain momentum again, with news such President Trump pushing state governors to ease their lockdowns and begin reopening their state borders again.
However, reopening so early, before the virus is under control, poses the risk of a wave of new infections flooding in. This poses the risk of causing more damage to the economy in the long term. Despite Trump’s eagerness to reopen the economy and start recovering the damage that virus has caused the stock market, the opposite could end up happening if he pulls the trigger too soon.
Our livestream is continuing to grow thanks to your support. We are live on our YouTube channel every day at 10.00 am GMT, and if you can’t make it then, you can always watch the recording, the latest of which is linked below.
After reaching close to $1,740 just a week ago, gold has now fallen and is hovering at the $1,680 support level. For the Asian session, gold remained largely unchanged, as it moved only 1% to the downside.
Gold’s status as the king of safe havens has been challenged by the US Dollar, which continues to consolidate above 100 points on the Dollar Index. Gold’s strength is inversely proportional to that of the US Dollar, and when the price of crude oil crashed earlier this week, investors flocked to the Dollar for liquidity, just as they had done when the stock market crashed. The oil crash was once again a stark reminder of the current market volatility and risk sentiment, driving investors back to the greenback for safety as a result.
Global governments and central banks have already pledged as much money as possible into the economy in a desperate attempt to mitigate the economic damage that the coronavirus pandemic is causing. But there is still currently extreme uncertainty over whether or not the crisis could continue to worsen or be prolonged. As long as the virus is still active, the economy will not be able to function properly, as people will have to maintain social distancing and many businesses such as retail will be affected as a result. Therefore, it is possible that all the money that governments have to spend could turn out to still not be enough.
Normally such a crisis scenario is where gold shines the brightest, but a number of factors, such as the shortage of physical gold in New York, where contracts are traded, and the increased demand for liquid cash as a safety net, has caused the USD to rise in strength as well.
For gold to rise the US Dollar would have to ease in strength, which seems unlikely in the current scenario. But while not as dominant as expected, gold is still strong. Due to the current risk sentiment and gold's ability to retain its value, it is still an strong option at the moment, so we should not see gold making any drastic price movements.
Last night on our YouTube livestream we analysed the price crash of oil, and the reasons for its crash. You can watch it below, or join us every weekday at 10.00 am GMT as we go over the latest news and market moves.