Asia Open : A calamitous affair

Overnight U.S. market recap

Following the US ADP employment report miss, U.S. Treasury yields fell; the Yen soared, The S&P 500 suffered its first back-to-back drops of more than 1% this year, Crude futures tanked to their weakest levels in a month while gold prices rallied back to the critical $ 1500 level.

Markets

Investors interpreted the US ADP report as further proof that the U.S. economy is slowing and possibly on the verge of a recession sending the S&P 500 to its first back-to-back drops of more than 1% this year and breaching the critical 2900 level.

The market was still digesting the weaker ISM data, and the implication for global growth then got whacked with the slide on the ADP data compounded by a catastrophic decline in U.S. auto sales. Which now raises more questions than answers about the resilience of the U.S. consumer.

The equity market price action was telling as it moved well beyond cyclical stocks and growth reactionary higher beta sectors like Oil, Miners & Industrial but was broad-based suggesting that investors are not only taking chips off the table but might also be folding their cards.

Also, the U.S. levied E.U. goods with new tariffs greenlighted by WTO ruling adding another brick in the wall of worry for E.U. investors.

Trade optimism could keep the risk on light flickering, but the dreary economic data does perhaps suggest that traders could be better sellers it this risk toxic environment.

Oil, slip-sliding away.

U.S. oil prices plummeted below $53 a barrel. Exacerbating the week-long price slide was a  government report indicating U.S. crude inventories actually increased. Which of course poorly contrasted the apparent one-off API survey draw that was thought to be a result of oil stores getting depleted due to the knock-on effect from the terrorist attack.

However, ignoring the inventory reports which have a propensity to swing wildly and forever miss " analysts " expectations. What's impossible to ignore is the economic realities being signalled in the latest run of doom and gloom financial market data which offers few if any reason for Oil investors to be optimistic over the outlook for global demand.

While the near-term triggers may continue to relate to oil demand, next week US-China trade talks remain the unknown variable which could lend a modicum of support

All that glitters is gold.

The disappointing data out of the U.S. and Europe, as well as weak earnings reports from automakers this week, has equity investors looking to golds umbrella to wait out this building storm.

Gold and silver are both trading constructively as 10-year US yields push below 1.60%, with equities under pressure. The ten years low in U.S. manufacturing ISM is being taken as a severe warning sign.  With the market risk lights shifting from amber to flashing red, gold and silver may continue to be the haven beneficiary as investors diversify away from risk assets.

Currency markets

Let the games begin

Its all about the lead in U.S. consumer data highlighted by the miss in private payroll and calamitous auto sales data

On the back of the weaker U.S. data prints, the USD has lost some of its shine from a growth differential prospect and with the U.S. yields toppling a yield differential perspective also.

The SPX broke critical supports at its 50-day and 100-day moving averages, and risk sentiment continues to wobble. As a result, USD is struggling vs JPY and gold, but the greenback is holding up vs E.M. and higher-beta G10.

Even at 107 and change, given the global economic backdrop and potential for risk aversion to take hold the USDJPY could move lower but remains precariously perched tentatively bid above 107 support on possible trade optimism.