Another rate cut over the weekend in China was a boost to domestic markets but the affect looks more muted in Europe and the US which both finished last week strongly and are pulling back on Monday. The April US jobs report on Fridayindicated a modest bounce back that eased both economic growth and rate-hike fears and helped stocks move higher.
It was the unemployment report that helped US stocks finish the week strongly, otherwise it had been a rather torrid weak. The main upset was caused by the plunge in US treasuries led by German bond markets that saw German bund yields nearly quadruple in a week.
Bonds are falling and yields rising again on Monday, in part reflecting the increased risk of a Greek default before its IMF payment deadline on Tuesday. A bigger systemic threat to bonds is that the slowdown in China is causing the country to reconsider its build-up of foreign currency reserves.
China is the second-biggest foreign owner of US treasuries, if it starts to cut its foreign currency reserves and allows its currency to float more freely, this reduces demand for foreign government bonds and could see prices drop further. ECB bond-buying is not such a net positive for bond markets, and indeed equity markets if China’s purchases head in the other direction.
As is traditionally the case, large US retailers will dominate the tail-end of earnings season and this week includes results from JC Penny, Macy’s, Kohl’s and Nordstrom as well as Cisco on Wednesday.
Futures suggest the:
S&P 500 will open 6 points lower at 2,110 with the
Dow Jones expected to open 39 points lower at 18,152 and the
Nasdaq 100 10 points lower at 4,448.
CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.