Friday’s gigantic Non-Farm Payrolls miss, as payrolls rose by only 266,000 jobs, is quickly being dismissed as an anomaly. The signs were already there in New York, with US 10-year yields plunging to 1.45% before rising back to 1.57% at the close. Stock markets rallied while the US dollar was pummelled. All very much global recovery behaviour with a dash of nagging inflation doubts.
Asian stock markets are off to a positive start today, but the commodity space is the real eye-opener. Shanghai Steel Rebar futures opened 10% higher and are now still 6.0% higher. Iron ore futures are 7.70% higher, while copper has gained 2.0%. So, while the US Non-Farm Payrolls post-mortems continue, as far as Asia is concerned, the global recovery is Thunderbirds Are Go.
Another mover this morning is the British pound after the results of the Scottish election have started rolling in. GBP/USD has risen 45 points to 1.4030 this morning, with sterling outperforming on the crosses as well, notably GBP/JPY, which is up 0.60% to 152.70. Although the Scottish National Party looks to have won the election, it appears it will not command an outright majority and another coalition government is on the way. Markets have decided that this reduces the risk of Scotland asking for another independence referendum. The whole situation is disingenuous, though, as Westminster has to agree to a referendum, and I can’t see them feeling the need to do so. Nevertheless, the market thinks this is a reason to buy sterling, and I’ll not stand in the way of that.
The other notable weekend news was the shutdown of the US Colonial Pipeline by hackers demanding a ransom, probably in bitcoin. That has pushed oil prices slightly higher today, but the real effect will be felt in refined products if the shutdown is drawn out. RBOB Gasoline futures spiked higher this morning in electronic trading, but have since retreated, although they remain 2.0% higher than Friday. The situation is only bullish for oil at the periphery, as this is not an oil supply problem; it is a refined products issue.
Cryptocurrencies had another emotional weekend, thanks to Elon Musk. Dogecoin, or as I call it, Pumpanddumpandpumpcoin, enjoyed a 40% range. Having risen on Friday after a Musk tweet with a dog, it fell when he called Dogecoin a hustle in a skit on Saturday Night Live, which he hustled. Mr Musk announced he was sending a satellite to the moon, much like Pumpanddumpandpumpcoin’s price action, next year in another tweet today. Dogecoin will likely follow suit.
On reflection, the juvenile behaviour of a group of billionaires and washed-up 70’s rock stars in leading an unwitting army of desperate retail “investors” to a get rich quick Dutch tulip garden is sad to see. Someone bought Dogecoin before the SNL programme and was nursing 40% losses after it aired. On the other hand, if you are stupid enough to stake a goodly portion of your net wealth on juvenile tweets and a comedy show, you probably deserve everything you get. I am not sure how carnage, anarchy and group-think amongst investors, the man on the street, financial institutions and the financial press has to occur in the crypto space before the world’s regulators step in and stop the madness. I can only hope it will be sooner rather than later.
Bitcoin, meanwhile, rose to USD58.800.00 of fiat US Dollar currency backed by the taxpayer revenue of the United States. The technical picture suggests the correction lower has run its course for now in a buy-everything world. A rally through USD60,000.00 will signal a test of the all-time highs around USD64,900.00, and possibly more if the US dollar stays weak and because of the announcement that a prominent investment bank has established a cryptocurrency trading team. No doubt there will be more inanity from “institutional experts” that this is another sign of Bitcoin and crypto’s ascent as “mainstream financial assets.”
The smell of easy money always attracts an army of wannabee easy money consumers. If cryptocurrencies were a pile of freshly laid steaming dung in a cow paddock, it would attract many flies, some of which may also be fans of SNL. But it’s still dung. And when it dries out, even most of the flies get bored.
Financial dinosaur moment over, it’s time to look at the economic calendar in Asia today. After the frenzy of last week, the pickings are bare. South Korean Private Bank Lending rose 3.0% YoY in March, a neutral result. But Australia delivered yet another healthy crop of data. NAB Business Confidence in April rose to 26, which Final March Retail Sales rose 1.30%, both handsomely outperforming. Looking at the data today and the ballistic rises in commodity prices this morning, the Lucky Country seems set to remain very lucky.
Malaysian Construction Output is set to remain negative this afternoon. Still, more attention will be focused on the government announcement of quite aggressive movement restrictions in parts of the country for the next fortnight. That encompasses the Eid migration, like Indonesia, and is a vigorous attempt to control the spread of Covid-19. Like Singapore, Japan, Thailand, and most of the peripheral ASEAN, Malaysia is dealing with a new wave of surging cases, with only Indonesia seemingly dodging the bullet. If the reaction in Singapore markets is anything to go by vis-a-vis new restrictions, Malaysian equities will struggle ahead of the end of Ramadan holidays this week.
From a data perspective, Asia is likely to be more focused on Inflation and New Loan data from China and US inflation data, all due this week. The ECB also meets, but this is officially a Non-Monetary Policy Meeting. The economic calendar has a more benign look about it this week after the fireworks of last. Meaning financial markets will be swept along in the ebbs and flows of global recovery sentiment.