Asia leads stock markets higher

Stocks are firmer in early trading in Europe, following from another strong session in Asia. The Hang Seng rallied a further 5%, with the Shanghai Composite Index up more than 2% on fresh chatter that China is looking at ditching its zero covid policies. Beijing says a press conference will follow tomorrow...oil trading firmer this morning on this and basic materials are leading the gains in European trade.  The risk is that this is all just a lot of puff and hot air. The FTSE 100 rose 0.8% or so to its highest since the middle of September near 7,250, and is heading for a weekly gain of almost 3%, whilst the DAX added half a percent to 13,200.  

Fed hangover

US stocks still traded with a Fed-induced hangover though yields have not kicked on. The Nasdaq composite index declined a further 1.7%, with the S&P 500 down one percent and the Dow Jones falling around half a percent. Tech was hardest hit, led by declines of 2-4% for the likes of MSFT, AMZN, GOOG and AAPL. Energy, industrials, utilities and basic resources tended to rise. Still in Dow > Nasdaq land. The Nasdaq is heading for a decline of almost 7% this week, partly on the Fed and partly because of the damage down by big tech earnings misses last week.  

Jobs data on tap

US nonfarm payrolls are up later with the US economy expected to show 200K new jobs. Wage growth is seen moderating at +4.7% from 5.0% last month. Unemployment is seen falling to 3.6%. ADP was +239k vs +195k expected, September JOLTS came in at 10.7m vs 10m expected. ISM manufacturing employment index rose to 50 from 48.7, ISM services employment declined to 49.1 from 53.0. Jobs growth slowing but still so far not enough to stop the Fed from hiking. 

Pound down

Sterling fell ahead of the Bank of England being cautious and a tad dovish, and took further losses as governor Andrew Bailey stressed that the market was still pricing in too many hikes. The strong pushback against the pricing of the terminal rate was consistent with what deputy governor Ben Broadbent outlined two weeks ago, so was not a surprise. But...longest recession in history and inflation at 11% means little good news for the pound to trade on. Chief economist Huw Pill stressed the fine balancing act the BoE faces in fighting inflation without wrecking the economy.  After testing 1.1150 yesterday, cable is around 1.1220 this morning, having been as high as 1.1650 last week. Trend support turned resistance now at 1.1250 with the cross slicing aggressively below its 50-day SMA yesterday looking bearish. A bearish MACD crossover also noted.

German factory orders fall, EZ PMI slides

The euro also remains under pressure after falling to its weakest in almost two weeks yesterday. EURUSD trades around 0.9770 this morning, a little firmer than the 0.9730 low tested yesterday. This morning, German factory orders fell 4% in September from the prior month as energy costs continue to hurt supply. The final Eurozone Composite Output Index declined to 47.3, a 23-month low, from September’s 48.1. “Economic trends worsened across the eurozone nations covered by the PMI surveys,” the S&P Global report said. The good news for the ECB is that demand is weakening, which could nudge inflation down.