The very strong US non-farm payrolls data released Friday may cause problems for the stock market rally as it may deter the Fed from cutting rates as strongly as hoped.

Fundamental Analysis & Market Sentiment

I wrote on 31^st March that the best trade opportunities for the week were likely to be:

1. Long of the S&P 500 Index. This gave a loss of 1.02%.
2. Long of Bitcoin, following a daily close above $74,000. This did not set up.
3. Long of Gold. This gave a win of 4.35%.
4. Long of the USD/JPY currency pair following a daily close above ¥152. This did not set up.
5. Long of Cocoa Futures, but with only half a normal position size. This gave a win of 0.39%.

The overall result was a net win of 3.72%, resulting in a gain of 0.74% per asset.

Last week saw low directional volatility in the Forex market, which has been relatively low since 2024 started.

Last week’s key event was the much higher than expected US non-farm payrolls data released last Friday, which saw over 300,000 net new jobs created, and a surprise fall in US unemployment from 3,9% to 3.8%. This has probably made the Fed less likely to cut rates three times over 2024 as expected, or at least pushed back the schedule for this, which will likely weigh on stocks. The major US indices all fell following the news, although they regained much of the loss late on Friday.

Last week also saw German Preliminary CPI come in slightly lower than expected, at a month-on-month increase of 0.4%, while an increase of 0.5% was expected, suggesting that German inflation may be cooling, as it fell to a 3-year low.

The past week also saw some mixed signals from Fed members, with Fed Chair Powell putting out his familiar line. However, three other FOMC members have made more hawkish statements about rate cuts, with one even suggesting that rates may need to be hiked before being cut!

The outlook for US rates will likely depend now on any further comments from Fed members which may happen, but probably most of all the US CPI (inflation) data which will be released this Wednesday.

Gold was a standout asset last week as it rose strongly to close right on its fresh all-time high it made on Friday at $330.

There was interesting action in other commodities markets, with Cocoa futures trading at a new record above $11,000. WTI Crude Oil is rising to hit new 5-month highs.

There were only a few other important economic data releases last week:

1. US JOLTS Job Openings – came in as expected.
2. Swiss CPI (inflation) – considerably lower than expected, showing no change while a month-on-month increase of 0.3% was expected.
3. US ISM Services PMI – a little worse than expected.
4. US ISM Manufacturing PMI – slightly better than expected.
5. US Unemployment Claims – approximately as expected.
6. Canadian Unemployment Rate – saw a stronger increase than expected, from 5.8% to 6.1%.

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