S&P futures jumped +8 points following better-than-anticipated jobs data, joining the rest of the global classic risk-on trades we are seeing this morning. In Europe, the Euro Stoxx 50 is higher by +0.61% led by Spain’s IBEX up +1.27%. Sovereign spreads in the euro-region are mixed but mostly modestly tighter to the bund, with Portugal being the notable exception, having its 10yr spread to the bund rising nearly +18bps to 668.7bps.
Overnight Treasury yields on daily charts show 2s drifting lower, while the rest of the curve consolidates. The 10yr was stabilizing at its top Wed. low at 1.68%, but has since broken above its 50 DMA of 1.7% and is trading almost four bps higher at 1.759%; resistance now sits along the 200 DMA at 1.8%.
The dollar has been rising considerably overnight and continues to do so, with the DXY Index up +0.438 points. Since the Sept. 14th low of 78.601, the dollar index has strengthened +2.46% to 80.48. I’d like to spend more time on this topic in a separate article where we further investigate the inverse correlation between the SPX and DXY, which, using a 120 day period sample set, currently has a correlation coefficient of -0.737, the lowest level since late 2009 . At a very basic level, think of a weaker dollar as keeping imports expensive and helping our large multinationals export more easily (cheap dollar obviously makes it less expensive for foreigners to purchase our goods). Often in our world we think of, a higher dollar as an indication of risk-off trades as investors shift money into “safe-haven” assets, while a weaker dollar indicates money is flowing out of those same “safe haven” assets and into more risky assets, such as equities.
In the commodity realm, energies are mixed with WTI declining while Brent slightly advances, metals are mostly in the red, and coffee and sugar are the only two softs making any move higher.