By Naeem Aslam
US and European stock futures are pointing to a lower open Monday as investors continue to digest the economic data released last week and are concerned about the implications of those numbers, while central banks remain confident that they can press ahead with more interest rate hikes.
On Friday, the US NFP data brought less good news than many anticipated, and it was pretty clear that the ADP continues to provide no indication about the non-farm payroll number.
But what traders are paying attention to on Monday is that it was the first time in a long time that the NFP number actually missed the forecast, and the unemployment rate also ticked higher.
So, all that lag in the data that everyone has been focused on has started to show up, which means that there is weakness in the US labour market data.
Nonetheless, the number wasn’t weak or strong enough to change the actual monetary path for the Fed, which means that traders are still apprehensive about more interest rate hikes.
The US CPI reading, which is still running twice as hot as the Fed’s target, will be the main focus among traders and investors this week. It is possible that this week we will see the reading dropping under 4%, and we believe that market players will actually cheer that number.
Anything that makes the reading fall in the three-handle and makes inflation come closer to the Fed target is really good news.
As for the UK, it is mainly about the cost of living crisis and soaring interest rates.
Traders know that the Bank of England isn’t done with the interest rate hikes, and this means that there is a lot more pain ahead for the economy. It is clear that disposable income is going to have a more adverse influence, and that means lower spending will result in lower economic activity.
Bitcoin lacking momentum
The crypto king is lacking some momentum, and over the weekend we didn’t see any meaningful movement.
Investors are largely hopeful that it will move higher, and the 100,000 target looks more likely than ever as BlackRock has taken on the role of Chief Marketing Officer. Traders know that BlackRock will have its ETF approved, and that means a massive liquidity event for Bitcoin and a decent flow of institutional funds.
Overall, we continue to remain highly positive when it comes to Bitcoin.
Oil prices supported
Oil supply cuts continue to support prices, while traders are keeping a close eye on the Chinese economic data and praying that demand will revive to a level that will give a boost to oil prices.
So far, it is clear that there are more sellers in the market who find every opportunity to sell oil whenever they see that weaker fundamentals are emerging, and to counterbalance that, OPEC is left with no other choice but to cut oil supply more.
This week, oil prices are more likely to consolidate, while investors hope to see a lower reading on the US CPI data, which would help Americans turbocharge economic activity.
Naeem Aslam is Chief Investment Officer at Zaye Capital Markets.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Zaye Capital Markets.