Markets rebounded after initial weakness driven by softer macro data and trade developments. The weaker JOLTs report supported USTs, helping yields retreat from session highs. Equities remained strong as trade tensions appeared manageable, with China’s response targeted rather than escalating. Oil remained volatile, while the dollar weakened amid strong EMFX performance. The market now looks ahead to US services ISM, the BOE decision, and the US jobs report later this week.
US Treasuries saw a strong recovery following overnight weakness, supported by weaker JOLTs data. The 30yr yield touched Friday’s highs of 4.83% before dipping below 4.75%, 10yr peaked at 4.595% before closing at 4.51% and 2s bottomed around 4.212%.
Meanwhile, China announced retaliatory tariffs on U.S. goods, maintaining focus on trade tensions.
· Equities: Stocks rallied; S&P +0.72%, Nasdaq +1.26%, Dow +150pts.
· Oil: Volatile session, hitting a one month low before bouncing on reports of a Trump executive order to restrict Iranian exports. WTI closed down 0.79%, having been down 3.4% at one point.
· FX: The dollar weakened, with BBDXY revisiting Friday’s pre-tariff lows at 1300.
Macro Data:
· JOLTs: Job openings fell to 7.6M (vs. 8.0M est.), openings rate at 4.5% (vs. 4.8% est.).
· Factory Orders: -0.9% (vs. -0.8% est.).
· Chicago PMI: 39.5 (vs. 40 est.).
· Q4 ECI: +0.9% in line.
· Dec Personal Income: +0.4% (in line); spending stronger at +0.7% (vs. +0.5% est.).
· Atlanta Fed GDP Tracker: Q1 at 2.9%.
Wednesday’s key events will be the US ISM-services report, including the employment subindex, US ADP private payrolls, and Canada’s trade figures. The US releases will serve as warm-ups for Friday’s nonfarm payrolls.
The employment component of ISM-services carries more weight than manufacturing surveys due to the dominance of services in the US economy. However, advance indicators such as ISM-services-employment, ADP, JOLTS, NFIB-hiring, and consumer confidence job data individually have little correlation to nonfarm payrolls.
This payrolls report will be complicated by two sources of revisions, the final annual benchmarking revision using state tax records and the quarterly re-estimation of the birth-death model, both adding to uncertainty. Consensus is for +170,000, but projections are as high as +205,000.
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