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The Daily Fix – Relief takes markets to new highs

Chris Weston
Head of Research
15 May 2024
The expression of relief ripples through risky assets, with markets coming alive the moment we saw US core CPI come in at 0.29% m/m, with the well-watched ‘super-core’ measure (core services ex-rents) moderating to 0.42% m/m (from 0.65% in March).
  • US core CPI offers relief to market players – The Fed will take comfort from the data
  • Solid buying in US Treasuries fuels equity upside and smacks the USD
  • NZD, SEK, NOK, and AUD outperform in G10 FX
  • Gold rallies to $2390, with silver flying
  • The ASX200 looks to open at 7800

Core services printed 0.41% m/m, and again, if the market feels US services inflation could be heading lower, they will have a greater belief that inflation can head to the Fed’s target over time.

All-in-all after three months of troubling price pressures, this is a report that will sit well with Jay Powell and co, with further signs that consumption is also moderating with the retail sales falling 0.3% m/m (in the ‘control group’ element).

We move on to the US labour market, with US weekly jobless claims due up in the session ahead and after last week's rise to 231k, this number may matter for market pricing. That said, it’s the US nonfarm payrolls (due 7 June) that could really move the dial, notably if we see a print below 175k and the unemployment rate above 4%.

Market moves on the session

The reaction on the session we’ve seen has been clear – US Treasuries found solid buyers from the outset, with 2’s trading from 4.77% into 4.70%, where they currently sit at 4.72% - and we see yields across the Treasury curve lower by 9-11bp. Interest rate pricing has clearly helped sentiment towards market risk, and we see a full 25bp cut priced for the September FOMC meeting, with 52bp (or two) of cuts priced for December.

S&P500 futures ripped post-US CPI from 5269 in a linear fashion into 5337, with the S&P500 cash market opening and naturally moving in alignment with futures, to close at 5308 (+1.2%) and to new all-time highs (ATH). We’ve seen good flows in REITS, utilities, and healthcare, but it's Tech that has really gone for it (the S&P500 tech sector closed +2.3%), with some sizeable rallies in names like Nvidia, Dell, Super Micro Computers, AMD, and Broadcom.

The NAS100 also printed new ATHs and is in fine form – the art of holding longs in blue sky territory kicks in now. But if the market is sniffing out a further decline in consumption and a cooling labour market, then these tech names should outperform and be a place of refuge.

Consumer names have underperformed, which won’t surprise too greatly – this is not a space to be long or overweight right now, and we see Amazon and Tesla taking out the points.

The USD has been sold universally, with some big moves playing in the NZD, SEK, NOK and AUD. Long NZDUSD was the play of the day, as high beta FX rallied hard – we sit above 0.6100 now in NZDUSD and look up at the next big resistance levels as far up as 0.6220. AUDUSD eyes the 67-handle and while we get April employment data today, where the unemployment rate is expected to tick up to 3.9%, we also hear from RBA member Hunter – the technical in AUDUSD set-up looks undeniably bullish, and pullbacks in this pair should be shallow and offer new entry points for longs.


EURUSD eyes a move into 1.0900, but this is hard to chase at current levels – I would be looking at longs into 1.0860 but wouldn’t be buying now at 1.0879. It’s been a solid shift higher from 1.0600 in mid-April and to many this move has been questionable – growth clearly matters, and while the US is still in a far better spot than Europe, Europe is now growing (albeit off of very low levels) and the US is slowing. For those who focus on the DXY, the break of the 50-day MA, which was strong support on 9 April and 3 May, suggests rallies are to be sold and further downside is the path of least resistance.

Crude has gained 0.8%, partly helped by a 2.5m drawer in the EIA inventory report, but the big activity we’ve seen is in gold, which has added $27 (or 1.2%) as it couples with a move lower in US bond yields and a weaker USD - $2390 was the session high, with the move halted into the upper Bollinger Band.

A further rise in US jobless claims may see the yellow metal above $2400, likely driven by a further bid in US Treasuries. Silver sits up 3.7% and having broken the $29 level we see price closing at new run highs – pullbacks again will be well supported, and this has further upside in my opinion.

Elsewhere it's hard to go past the move in crypto, where Bitcoin (closed +7.2%) has broken channel resistance and moved above the 50-day MA. The 23 April swing high of 67,252 is the near-term target and the level to watch, but a break here and we will likely see traders chasing this move for a push into 70k.


Turning to Asia, our opening calls look positive for the ASX200 +52p (or 0.7%) and the NKY225 +318P (0.8%). As mentioned, we see Aussie employment data at 11:30 AEDT, with Japan’s Q1 GDP due at 09:50 AEST. The set-up on the ASX200 looks interesting with price having broken the short-term downtrend and eyes a test of the 8 May high of 7816 – with the index likely to open at 7800, it feels a stretch to think we can break that today, but that is the target for the bulls.

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