Will Jobless Claims Reaffirm a Rebound?

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Risk-off dominates post FOMC minutes
Gold consolidates losses
Nikkei -1.00 Dax -1.20%
UST 10Y 0.66
Oil $43
Gold $1926/oz
BTCUSD $1756

Asia and the EU
No Data

North America Open
USD Weekly Jobless 8:30

There has been a decidedly risk-off tone in the markets overnight with stock index futures lower across the board but off the session lows as investors continued to react to the cautious tone of Fed minutes.

The dollar firmed up a but after days getting a drubbing, but the rebound has been tepid at best as most of the majors were essentially unchanged in morning London dealing.

Gold licked its wounds near the lows of the session after a massive profit-taking selloff yesterday as it failed to hold the key $2000 level and dropped nearly 100 dollars in the New York trade.

The Fed minutes indicated that monetary officials were unwilling to engage in any additional extraordinary measures for the time being including such unconventional measures as yield curve control and would take a wait and see attitude with respect to policy. The Fed also believed that another round of fiscal stimulus would be coming and was clearly counting on more active support from elected officials to revive the economy. The fact that policy differences have bogged down the legislative process is sure to weigh on their economic outlook going forward.

How much of a negative impact on the economy will the current stalemate in Washington have? Today the market will get a look at the weekly jobless figures which are expected to improve to 15M continuing claims versus 15.5M the month prior. If the trend moves in that direction investors are likely to breathe a sigh of relief as it would indicate that the US economy is reviving organically even without further fiscal stimulus support as business reopen and the pace of transactions increases.

If however, the jobless claims show a jump the equity selloff that started yesterday afternoon is likely to accelerate as doubts will creep in that the current rally in stocks is not justified by the data. With equity markets near all-time highs, the momentum still rests with the bulls but as we’ve seen with gold, the profit-taking selloffs can be swift and brutal.

Boris Schlossberg
Managing Director

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