Today’s market analysis on behalf of Michael Brown Senior Research Strategist at Pepperstone
DIGEST – Equities gained yesterday, with spoos clearing 7000 for the first time, while Govvies also advanced across DM. Today, focus falls on the weekly US jobless claims stats, ahead of the December jobs report tomorrow.
WHERE WE STAND – Less than six months after the last round number milestone, we have another one, with spoos having yesterday traded north of the 7,000 mark for the first time ever.
As an equity bull, taking out this level, and trading to fresh contract highs, pleases me greatly, even if I am marginally frustrated that we missed my call for this to happen by the end of 2025 by just seven days.
Regardless, the leg higher that we saw across the equity complex yesterday had no especially obvious catalyst, and was more representative of the positive momentum that we’ve seen over the last few sessions, with it thus far having been a very strong start to the year indeed for risk assets. My view remains that the overall bull case for equities remains a solid one, amid a resilient underlying economy, robust earnings growth, and looser monetary/fiscal backdrops stateside. Of course, that assumption about earnings growth will come under scrutiny next week, when Q4 earnings season gets underway, and there may potentially be a little position squaring that takes place in the run up to reporting season kicking-off.
Back to yesterday, and as alluded to, fresh fundamental developments – at least those that were impactful to the price action – were fairly lacking on the whole. The US data slate was a bit of a ‘mixed bag’, with the ISM services PMI rising to a 14-month high 54.4 in December, but job openings declining to a 14-month low per the November JOLTS report. On net, neither of those tell us much by way of new information.
Elsewhere, besides that upside in the equity space, chunky gains across DM fixed income was probably the biggest takeaway from yesterday’s trade. Once again, there seemed to be little by way of an obvious driver behind the move, with news flow on balance having actually tilted bearish for FI, not least considering that there have been almost 40 new US investment grade sales in the last three days alone.
What was perhaps even more remarkable about the move in the fixed space was that Gilts outperformed – and, no, that’s not a misprint! Benchmark yields fell across the Gilt curve, with the 10-year yield sliding to its lowest since November, and the 30-year its lowest since last April. I’d imagine that there is probably a degree of position unwinding going on here, but would be cautious about chasing further gains, given the incredibly fragile fiscal backdrop here in the UK.
In any case, there wasn’t much by way of follow-through from that firmness into the FX space, where trading conditions remain very turgid indeed. The greenback gained some ground against most peers yesterday, though that move simply took cable, for instance, back to where it was on Monday afternoon. Hardly much to be excited about, and we may have to wait until tomorrow’s jobs report to spice things up a little.
LOOK AHEAD – A few ‘bits and bobs’ on the docket of note today, but you’d imagine most participants are already starting to focus on tomorrow’s jobs report.
As for today, though, attention will initially fall on this morning’s eurozone PPI and unemployment figures, the latter set to have held steady at 6.4% in November, though neither are likely to significantly move the needle in terms of the ECB policy outlook.
Across the pond, today not only brings two sets of remarks from uber-dovish Fed Governor Miran, but also the weekly jobless claims stats. Neither of those claims metrics, however, pertain to either the Dec or Jan NFP survey weeks, thus lessening any potential market impact from the figures.