Everything looked spectacular after US employment surged for the month of February to 273,000 jobs created. Likewise, the previous month figure was revised to show the same figure of 273,000 jobs added. The unemployment rate eased to a 50-year low of 3.5%.
But the stellar figures failed to prop up the stock market when investors were dumping stocks due to potential fallout from the coronavirus. Slowly, more countries are closing their borders to stop the spread of this virus. And markets considered that the 273K jobs created might be the end of the good run for the US with corona cutting most of the global economic prospect due to supply-side disruptions.
The effect of the growth revisions will push the world central banks resuming the race to the bottom with both US and Canada cutting 50 bps on their cash rates while Australia cut 25 bps. More central is soon to follow.
Another casualty of the corona epidemic was energy prices dropping to mid-2016 low. Russia is starting a price war after failing to agree with OPEC to cut 1.5 Million barrels per day to prop up oil prices. Prices plunged almost 4% Friday. If Saudi Arabia decides to fight Russia with pumping more crude as this price war intensifies, we might even see oil prices down to the 2015 level.
Plunging oil prices will benefit countries like Japan and therefore USDJPY is now down to 104 levels.
Investors are at a crossroads whether to unload more stocks in order to protect their portfolio or to add more shares while PE rations are more reasonable compared to a few days ago and interest rates will remain close to zero and bond yields are at absurd levels.
The big question is where to park your funds?
DOW - minus 9.4% % YTD
S&P – minus 8.0% YTD
NASDAQ – minus 4.4 % YTD
CNY China New Yuan Loans (Feb)
CNY China Consumer Price Index
USD Consumer Price Index (Feb)
EUR ECB Rate Decision
EUR Deposit/Lending Facility Rate
USD U. of Michigan Sentiment
Author: Ricardo Garrido is the Senior Account Manager at Rockfort Markets Limited in New Zealand and has over 20 years of experience in trading and the financial markets.