Apr 7, 2017 - Market Update

Short recap

Asia lower, safe heaven flows to bonds as US strikes can rise the confrontation risk with Russia and Iran

Russia calling for UN Security Council meeting, US informed RU about strikes in advance

Don’t want to sound cynic but it was a very good move from Trump’s team and Trump will definitely benefit

In other words diverting the attention from economic agenda to something else (for the time being)

China has no comments so far

Trump-Xi socialized a bit yesterday, no working talks yet

Geopolitical events difficult to trade but they usually mean revert as the market finds another theme

Sitting on crucial levels:

USDJPY at 110.00

US Trys yield close to 2.30% support

Gold above 200 DMA at 1256 and above recent high

S&P 500 to decide soon which to go

Oil was 2% up

10-yr Trys yield at 2.32% - after falling as low as 2.29% quickly recovered

10-yr Bunds yield at 0.25% - Draghi confirmed there is no need to change monetary policy

AUD down on risk off and fall in iron ore

EURUSD to test support at 1.0623 (100 DMA)

JP econ adviser saying JPY not at extremely strong levels

EURCZK cap removed

FX foreign reserves come close to USD 115 bln with a huge jump in 2017

No surprise that CNB acted that quickly right after official hint from last week

Overall it was an expected move, no huge reaction, handled it way much better then SNB

Looking at a steady move lower but still a short covering can take place as some speculators were betting on a sudden move

EURCZK at higher levels would mean a better entry point for CNB foreign reserves offloading

Stocks very muted reaction to Syria strikes

Defence stocks likely to benefit today

Step by step move over to high quality and low volatility stocks may be warranted

Unilever on the way to prove its shareholders both financially and via restructuring that it can run biz on its own

Adidas putting the 3D technology to real life to produce more customized products

Linde-Praxair merger – Linde board having headaches

Twitter co-founder sold some minority shares

JPMorgan, GS and RBC enjoying increase in M&A activity in Canada

Data

US NFPs

Headline 180k exp vs 235k prior

Unemployment rate 4.7% exp vs 4.7% prior

Average earnings +0.2% exp vs +0.2% prior

Few comments apart from official numbers above:

A bit mixed views as employment was strong in ISM Manufacturing

While dropped substantially in ISM Non-manufacturing

ADP strong at 263k

Jobless claims steady

Our expectations are closer to 200-220k

Market putting more emphasis on the dynamic of hourly earnings grow because of inflation pressures

That in turn may benefit USD

With this respect would need to see earnings growth at a higher pace than +0.2% m/m or +2.8% y/y

Weather may play a role

Unlikely that a bad surprise would effect Fed rate hikes

Wouldn’t be surprised if stock markets finally take a note of hiking…

Trump meeting Chinese president (2^nd day)

NATO foreign ministers meeting (2^nd day)

Fed’s Dudley speaking

Short week next week ahead of Easter holidays

Apr 23 – French presidential elections

Apr 29 – EU Summit to sign off the Brexit negotiations guidelines – until then we won’t have clearer EU position on Brexit

May 7 – French presidential elections 2^nd round

Should you have any questions feel free to contact me anytime.

Good luck Champs!

Mr Hawk

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