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A strong rally in US Treasuries has been helpful, while a solid move higher in HK equity also helping to an extent. Given the choppy price action of late, at an index level, the bulls will take a 0.9%% gain in the S&P500, with 71% of stocks closing out the cash session higher, with the NAS100 outperforming as funds went about their business layering into tech/AI names. Amazon has also worked, and it won’t surprise now if we see new all-time highs emerge soon.
In the post-market session, the focus was on Apple, and clearly, the numbers and guidance have resonated and delivered to investors with beats across the key metrics, while a boost to the dividend and an additional buyback of $100b of shares is an additional sweetener - shares sit an impressive +7% higher in the post market session, with price breaking out above the top of the recent range highs of $178.67. NAS100 futures sit up 0.6% higher after the cash market close and this should flow through and support the Asia equity open.
Ahead of US nonfarm payrolls, we’ve seen a solid rally in the US bond market with yields lower between 5-9bp across the various tenors – a factor driving equity gains, as the cost of capital falls and financial conditions ease. The USD has taken direction from the 9bp fall in the US 2yr Treasury, as such we see a newfound inspiration to buy into the high-yielding plays – notably, the BRL and CLP have worked well, with the AUD also finding love with AUDUSD lifting into 0.6573 and once again testing the downtrend drawn from the December highs. AUDNZD has been a favoured long, but GBPAUD is getting increased focus as we see price eyeing new 40-day lows.
USDJPY looks heavy, where we saw a steady and consistent bleed lower from Asia into US trade, with traders taking the pair into 153.05 before the buyers stepped in – we see a holiday in Japan today, so liquidity could be a factor again, and while we’ve seen two bouts of MoF intervention another $20b of JPY buying today would really scare off the JPY shorts, and get USDJPY below 150 – good things come in three’s, and while another bout of intervention seems unlikely, the MoF/BoJ could turn momentum trader and shake things up one last time ahead of NFPs.
We turn to what looks like a modestly positive open for Asia equity, although Japan is offline, and the HK50 rallied strongly yesterday and starting to look a tad overbought. We can see that the net change in S&P500 futures since Asia cash equities closed shop is 0.8% higher, so this will underpin the open.
With tech and chip stocks around the region likely catching a tailwind from how US names traded, we could see follow-through buying after cash equities open, and without too much trouble from a geopolitical standpoint, there should not be too much concern with holding risks through the weekend.
The US payrolls report is a factor though but given the Fed has told us they are not looking at hikes, good news on the data front will likely be good for risky assets and the upside for the USD should be limited. It suggests the big driver of markets will not be the actual level of jobs created, but the unemployment rate, so an unchanged read at 3.8% could see equity rally.
Good luck to all.
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