Last Friday, we saw the Non-Farm Payrolls (NFP) number in the US come in well below expectations. Around 735k jobs were expected to have been added in August but the number was closer to 235k. Given the significance of the reading and the follow on effect on the Fed's tapering program, a selloff would have only been logical. Equity and Treasury markets were very well behaved though, with the Tech sector helping Equities stay buoyant. The US yield curve steepened as well with the 10Y moving higher after the release. This is because the market was willing to see past the miss this time around and focus on the broader trend. The fact that the unemployment rate fell to 5.2% from 5.4% as expected, would have helped here. However, the reason for the dip (given fewer jobs created) is most likely people falling out of the labor force - a negative for the economy in the medium term.
Last week saw European Equities underperform both in the US and Asia. Japan came out on top with a gain of 5% as PM Suga said he would not be seeking re-election as the head of his party at the upcoming election. His approval rating had dropped significantly with the handling of the Covid waves. The positive sentiment garnered by the Olympics wasn't sufficient to see him through. While positive in the near term, an extended period of political instability (like before Abe) could hurt the market in the medium term.The US dollar was surprisingly weaker on the week as yields rose modestly. Only the Swiss Franc did worse with most of the EM and commodity currencies bid - with the South African Rand leading the way. Commodity prices themselves were mixed with Iron Ore down on the week after the recent bounce. Despite the volatility caused by Tropical Storm Ida, Crude was mostly flat but Natural Gas was notably higher. Grains closed the week in the red, unable to maintain momentum from the week prior. Gold was sideways once again with Silver outperforming in the precious metals space. The Crypto world was lit up again despite the recent regulatory actions against Binance. Ethereum gained close to 20% to make a run at the 4k level and Bitcoin conclusively broke above 50k in Asia this morning. Next up would be the 64k highs from earlier in the year (around the time of Coinbase's IPO).We have some central bank decisions ahead this week. Upcoming ones are Australia on Tuesday, Canada on Wednesday, the Eurozone on Thursday and Russia on Friday. Amongst these, only Russia is expected to hike 25 bps to curb inflation. The statements of the rest will be parsed for a potential hawkish shift looming in the future.
September 6, 2021
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