Originally published by AxiTrader
The focus Friday was on the US military strike on Syria and the release of the underwhelming US non-farm payrolls release for March.
Taken together many times over the course of my almost 30 years in markets that would have been enough to cause a deep pullback in stocks and other risk assets and a sharp move in bonds, gold, and the yen.
Of course those moves did happen Friday - but they proved ephemeral. That speaks volumes for the lesson traders learned in the aftermath of Brexit and the US presidential election surprises in 2016.
That speaks volumes for the lesson traders learned in the aftermath of Brexit and the US presidential election surprises in 2016. The lesson, carry on and don't panic, helped stocks finish only mildly lower in the US while gold closed at $1253, well off its high of $1270 an ounce. The yen was higher on the day with USD/JPY closing at 111.05 while crude oil only gained 1% with WTI ending the week at $52.24.
But while the focus was on these two massive events in many ways I believe the release of the latest round of Citibank economic surprise indexes for the global economy is more important for the health of the rally in stocks and other risk assets.
And the news on this front was sobering.
With the exception of the Australian economic surprise index all of the major Citibank economic surprise indexes I track were lower last week. As you can see on a 4 or 12 week timeframe the outlook is a little mixed.
But the key here is I am picking up a turn in my primary indicators- G10 and Emerging Markets (EM) - which I watch and use as an indicator of overall market sentiment and pulse.
That's important because as readers know this indicator was a strong supporter of, perhaps the real impetus for, the Trumponomics Trumpflation rally. The stronger data prints allowed traders and investors the world over to believe in the message Donald Trump delivered with regard to stimulus and the prospects for the US economy.
But, as I highlighted in my piece last week, Danger Will Robinson - global data started to turn in March and that's a warning for stocks, the data doesn't even need to get too negative it just has to stop beating expectations to undermine the rally in risk assets.
Already we are seeing this in what appears to be a global rethink on reflation via the big fall in the Aussie dollar over the past week. It closed below 75 cents on Friday at 0.7492 - its weakest week's end in a month.
Again it's worth viewing Friday's release of the Citibank economic surprise indexes against the Fed's warning last week on US stock market valuations and Credit Suisse (SIX:CSGN)'s question on whether we might have hit peak "reflation".
It all means that earnings season, which kicks off this week in the US, is a critical part of this story. Current earnings estimates are for year on year growth of more than 9%. That's a phenomenal number in an economy growing at 2-2.5% per annum.
So while earnings season could be the fillip risk assets need to kick to the next level. The current data flow suggests the global economic pulse is fading.
Have a great day's trading.