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Strong ADP but Equities remain weak and USD mixed

Market Analysis


U.S. equities are back underwater in the wake of the Cohn resignation at the NEC after his last-ditch effort to avoid blanket tariffs on steel and aluminum failed and he finally proved the rumors true. This suggests that despite resistance from within his own cabinet and party, the Trump tariffs and an array of retaliations will now go ahead with the trade hawks in charge. Though Commerce Secretary Ross downplayed a trade war, investors are now bracing the risk that a widening tit for tat on trade will be a net negative for global growth, earnings and employment. Meanwhile, the ADP jobs survey came in firm, the trade gap widened and Q4 productivity was revised up to flat. The Dow is 251-points lower, S&P sank 19-points and NASDAQ is off 41-points in pre-market trade. VIX equity vol is 8% higher, having hit a high of 20.49 earlier. This followed declines of 0.7-1.0% in China and Japan, while Europe is more mixed, led by a 0.5% gain on the German DAX and lagged by the French CAC at -0.1%. The Fed’s Beige Book report is due later, along with Fedspeak from NY dove Dudley.

Meanwhile, yesterdays rally in Gold has faded into the US open as the yellow stuff trades around the pivot point of 1330.77. Earlier, a short position triggered at 11:00 following, the EMA cross (1) a breach and break of the 20 period moving average Bollinger band mid line (2).  Entry at 1332.30 (3) with target 1330.00 (5) from the 14 ATR (4) achieved a net gain of 230 pips. The Stop Loss was at 1336.03 (6) above the latest turn. Details were explained in our video this morning and Webinar this afternoon.


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Stuart Cowell

Senior Market Analyst


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