Euro up through 1.12, stocks felling a bit 1987, Aussie dollar smashed

Quick Recap

Watch German Bunds folks – they have sold off from 0.16% earlier this week to 0.39% last night. That doesn’t sound like much of a move but honestly, the capital that has evaporated for those who owned them 0.16% is massive.

That has me worried about the potential for it to continue to sell off and to then impact on other asset classes like stocks. Of course that didn’t hurt European stocks last night but the stronger than expected data which supported the FOMC’s notion that the economy is not as weak as it looks.

Indeed as you’ll below in my comments on the data from Business Insider this morning zero interest rates are simply not consistent with the current state of the US employment market.

On the data front, just one day after an appalling GDP print in the US the data looked a lot healthier with jobless claims of 262,000 hitting a 15 year low. Akin Oyedele from BI NYC reports “the employment cost index, or ECI, climbed by 0.7% in Q1, a pace that was a bit stronger than the 0.6% rate expected by economists. This represents a 2.6% gain from a year ago, a big jump from the 2.2% gain last quarter. And these two data points on the labour market show we might be at full employment.” That tells me the Fed is definitely going to hike this year. Employment outcomes like these are not consistent with 0% interest rates. That’s a risk for stocks.

Elsewhere Crude is ripping higher, gold tanked, the commodity bloc lagged (suggesting the pre-emptive leak of what the RBA might do next week was unnecessary) and the ASX 2000 is so close to a 300 point fall its not funny.

On the day

On the data front today there are holidays in China and much of Europe for May Day. That doesn’t mean we won’t get PMI data out of China with NBS data due, while in Japan we get CPI data. Here at home we get AiGroup PMI and ABS PPI and tonight ISM numbers from the US.

Here’s the overnight scoreboard (8.47 am AEST):

• Dow Jones down 1.08% to 17,840
• Nasdaq down 1.64% to 4,941
• S&P 500 down 1.01% to 2,085
• London (FTSE 100) up 0.21% to 6,960
• Frankfurt (DAX) up 0.19% to 11,454
• Paris (CAC) up 0.14% to 5,046
• Tokyo (Nikkei) down 2.69% to 19,520
• Shanghai (composite) down 0.76% to 4,442
• Hong Kong (Hang Seng) down 0.51% to 4,749
• ASX Futures (SPI June) 5,753
• AUDUSD: 0.7896
• EURUSD: 1.1208
• USDJPY: 119.47
• GBPUSD: 1.5348
• USDCAD: 1.2073
• Crude: $59.69
• Gold: $1,183

CHART OF THE DAY:

ASX200: this chart speaks for itself. I’ll be trading the range until it breaks which I think it might. 

I’ll leave yesterday’s Euro chart in again and note that the “Weekly breakout can run further.”