An interesting weekend, next week will be busy again with lots of scheduled news and central bankers. This week pivoted on 2 things for me, the US CPI reaching 6% and then the lackluster US 30-year bond auction. Next week there is still inflation and price data coming in so watching the yields and fixed income markets will be helpful.
It is Friday so hopefully, everyone stayed on the right side of the trades today and will have a great weekend. The US session open could have caught quite a few people off guard as the open in the equities was looking very much like a continuation of the recent sell-off. Only for them to slingshot the Nasdaq back up to 16180 and the volume point of control from Wednesday. This wasn’t the only reversal today. Even the date was set up for a reversal, as the 12th of November 2021 can also be written 12-11-21.
The UK FTSE100 looked like it was reversing rather than pulling back as word came out through the government "that there remained significant gaps to be bridged,". The EU is not currently budging from the use of the ECJ within the current framework, whereas the current UK government wants to be under the jurisdiction of the UK’s appointed top judges, but there may still be an issue with fishing rights too. The FTSE100 high was 7396 but at the time of writing the FTSE100 had traveled 50 points lower, undoing more than 50% of the price action from yesterday.
Today's scheduled economic releases from the USA included the Jolts Job openings which came in bigger than expected at 10.483M but under the previous revised reading of 10.629M.
In the coming weeks, the University of Michigan Sentiment and Inflation Expectations may undergo some changes as today they were just preliminary. The consumer sentiment shows a big dip, down to a 10-year low for November as consumer sentiment fell to 66.8 from 72.4 expected by the market. The low reading is blamed on rising inflation and the consumer perception that there are no policies being implemented by the Fed to control inflation.
The US dollar couldn’t sustain its trajectory and maybe some profit-taking came into play. The TLT was down with US benchmark yields higher after the JOLTS job report came out but the relationship between the US 10-Year yields and the greenback faded.
The softer US dollar index was good for the GBPUSD which looks to be closing back inside the range that it recently broke lower. The Bank of England is still talking about raising rates when the time is right, whereas the Fed has said that maximum employment needs to be observed before they lift off. It could be that with President Biden about to nominate the next Fed Chair or possibly hand the reins to Jerome Powell for another term, could put some unease in the markets. One thing the markets do not like is the unknown. The point also is that the money markets could also be buying at discount here ready to front-run the BoE rate hike ahead of the Fed.
Nat Gas reversed the entire Belarussian rise yesterday. This was also a welcome reversal. A breakout, retest, and continuation trade would have caught the attention of the technical analysts, so the downside momentum could be enough to push Natural gas prices back down to the August swing high.