Morning show: Sell everything (except dollars)!


A trader works on the trading floor of the New York Stock Exchange (NYSE) in Manhattan, New York City, US, May 5, 2022. REUTERS/Andrew Kelly/Files

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A look at the upcoming day in the markets of Dhara Ranasinghe.

When the blue-chip Dow Jones drops more than 1,000 points in a single day, US Treasury yields jump by as much as 20 basis points and the British pound drops more than 2%, you’d be forgiven for thinking that investors are selling. Put everything.

But with the safe-haven dollar surging to its highest levels in 20 years, at least one asset was benefiting from Thursday’s market chaos.

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The waters certainly look calmer as European trading kicks off, though Asian stocks tumbled overnight.

After he breathed a sigh of relief that the Federal Reserve did not choose to raise rates by 75 basis points at this week’s meeting, changing the minds of investors who were concerned that large rate increases – such as the Fed’s 50 basis point movement – could lead Lead to severe economic slowdown or recession.

Adding to the volatility was a rise in US real or inflation-adjusted bond yields, which rose to their highest level since early 2020.

The Bank of England’s warning of recession risks and inflation rising above 10% exacerbated concerns about the growth outlook, leading to the biggest one-day drop since March 2020 (and we all remember why this month came up, right?)

Given that it is the day of the US non-farm payrolls, Friday’s trading session may not lead to a quiet end to the week.

Economists polled by Reuters had expected the US economy to create 391,000 new jobs in April, compared to 431,000 the previous month.

The unemployment rate is expected to drop to 3.5%, which would make it its lowest level before the pandemic.

The jobs data, along with US inflation data next week, should help frame the debate over the Fed’s policy outlook.

Key developments that should provide further guidance to the markets on Friday:

Tokyo consumer prices rise at fastest rate in 7 years Read more

– The European Central Bank must raise interest rates quickly, says head of Germany’s Ifo institute –

Swedish Central Bank minutes

– Federal Reserve Bank of New York President John Williams

Non-farm payrolls in the US

– Consumer Price Index in Brazil for the month of April

European earnings: Adidas, IAG, Amadeus, Intesa San Paulo, Paisley

– US earnings: CIGNA, Goodyear

US non-farm payrolls
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(Reporting by Dara Ranasinghe; Editing by Karen Stroecker)

Our criteria: Thomson Reuters Trust Principles.