US recession fears spook markets
Friday’s very weak US non-farm payrolls number and jump in the unemployment rate have raised fears of a recession in the US, pushing US bond yields and equity markets sharply lower and the Dollar weaker. Non-farm payrolls rose by only 114k versus market estimates of 175k, while the US unemployment rate jumped to 4.3% from the previous 4.1%.
The 10-year US bond yield has fallen to 3.75% from Friday’s 3.97% opening, with markets now pricing in a 100bp rate cut this year by the Fed. The Dollar lost 1.1% against the Euro and 0.4% against the Pound on Friday but the most significant move has come against the Yen which is trading at a 7-month high of 142.52. The Yen has gained over 4.6% against the Dollar since Friday morning as traders unwind the short Yen carry trade on expectations of higher Japanese interest rates and lower global interest rates. Both Japan’s Nikkei and Topix stock indices have now fallen by over 20% from recent highs.
Risk sentiment has fallen sharply, and we have EM and risk-sensitive currencies starting the new week on the back foot. The Rand is trading weaker at 18.41 this morning and a test of the recent double top at around the 18.52 is on the cards.
Gold flat this morning, oil falls further
Gold is trading unchanged at Friday’s softer closing level of $2,443 but the short-term outlook remains relatively bullish given the fallout in other markets and the rising Middle East geopolitical tensions.
Platinum and Palladium have opened the new week trading sharply lower at $938 and $871 respectively. Brent crude has fallen to $76.40 this morning on the back of the US recession and global growth fears.