Stock markets are deep in negative territory on Friday, a day that will not be as dominated by the US jobs report as expected.
Financial stocks are being hit particularly hard this morning on the back of reports of SVB Capital attempting to sell stock in order to shield itself amid large losses and withdrawals. This comes shortly after the collapse of Silvergate Capital and as investors are already concerned about the ramifications of the Fed’s aggressive tightening cycle.
Ultimately, what we’re seeing today is a very defensive response to a series of events that have left investors with many more questions than answers and fearing further ripple effects in the financial sector. It’s understandable but yet unclear how long that will last and whether it will worsen.
Markets fear another hot report
It’s provided quite the distraction from what was meant to be the headline event today, the US jobs report. While that could be welcome, you have to wonder how much more severe the response will be in the event that we get another red-hot report. That isn’t the base case at the minute and we could even see the pendulum swing the other way.
What this means is investors are in a very fragile state going into the weekend and it will be very interesting to see how the day plays out now that there are so many more moving parts. A cooler jobs report would obviously help but it may not be enough to get investors back on board given the uncertain days ahead.
Starting the year strongly
The UK economy got the year off to a strong start with 0.3% growth in January. That both exceeded expectations and likely backed the view that the economy is not in as weak a position as feared. A recession has gone from being an inevitability to possibly avoidable and the pound is reaping the rewards, trading close to 1.20 against the dollar and up almost half a percent on the day.
Choppy trading remains in gold
Oil has pared earlier losses but remains lower on the day as we near the end of the trading week. We’ve basically just experienced last week but in reverse, in keeping with how oil markets have traded since early D
Choppy but ultimately range-bound action has been evident throughout that period and while traders will have an eye on the range lows – which have been gradually rising – there’s currently little to suggest we’re about to see a major breakout in either direction. We’ll need to see more concrete evidence that either the global economy is facing dire straits or China’s rebound is going to far exceed expectations.
Jobs report key for gold
Gold is tentatively higher ahead of the jobs report, potentially seeing some safe-haven flows while capitalizing on a slightly softer dollar. Ultimately it’s all about that jobs report though, most notably wage data but also the NFP number after the January report blew everyone away.
Key support and resistance levels remain unchanged, with $1,780-$1,800 below being key and $1,860 above representing the first test of resistance. A cooler report could see that come under pressure, although it would have to be significantly better to ease concerns amid a more hawkish Powell earlier this week.
A testing weekend ahead
Cryptos have shown strong resilience during this year’s resurgence but the last 24 hours or so have been a step too far as it’s gone back into freefall. It initially broke below $22,000 yesterday and now $20,000 appears to be crumbling too. This is a big setback driven by another stream of negative headlines that have hit sentiment in the broader markets too and hit bitcoin by more than 10% since yesterday’s open. A testing weekend lies ahead.
For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/
Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA
