As you would have expected, all eyes were on Shanghai as the stock market opened with no limit restrictions imposed. It was not to be the session from hell that some dealers had feared but was almost calm. It is human nature to want to sell when they are restricted. When they have the ability to exit, they think more clearly. Admittedly, we saw a 5% swing within the first hour or so but thereafter was controlled trading and higher prices. It is always the unknown that people fear most and the thought of where the market will open having been a limit down close. The Nikkei returned a little of JPY safe-haven positioning of yesterday, and hence the Nikkei closed small down (-0.4%). The HSI traded higher the majority of the day and closed off it highs but still up 0.6%.
In Europe, all core markets saw bounces ahead of the U.S. numbers, and by lunch time all were around 0.6% firmer.
Exactly what the markets needed was a strong employment number and a 292k print from the USA which was far better than dealers could have wished for. There was a time when 200K was seen as a bearish number. Now, 200K is regarded as OK.
Despite an initial stock rally the nerves got the better of the market, especially ahead of the weekend, and so we tended to drift in back in thin trade. Towards the close, the nerves returned, and with it, the seller’s. Eventually closing down 167 points this really has been a welcome to the New Year.
Oil traded on a much firmer tone (both up around 2%) on rumors that OPEC were planning an emergency meeting to discuss recent price movement. These rumors were denied by delegates but with talk of a global economic slowdown and China getting the blame, they may as well let the yuan float sooner rather than later. This will undoubtedly be the main topic of many a Sunday newspaper.
Safe-haven assets lost yesterday’s gains which resulted in losses for gold and U.S. Treasuries. The European peripheral spreads all returned their spreads with the added comment from ECB Council Member, Philip Lane, that more QE will be done if needed.
The strongest gainer was the U.S. Currency making ground against core but also against EM currencies. The DXY (U.S. Dollar Index) was last seen at (+0.4%). Main gains were against the GBP (+0.7%), PLZ (0.6%) and SEK (0.75%).