STATE OF THE MARKETS

Stocks lower on labor market concerns. US stocks generally closed lower on Wednesday, after ADP jobs reports showed only 330k jobs were added instead of 650k expected. Except for Nasdaq (+0.13%), Dow (-0.92%), S&P (-0.46%) and Russell (-1.23%) were in the red, amid safe haven flows to bonds and cash as the 10Y yields stabilize around 1.18% and Dollar closed higher above 92.25 mark.

In the commodities market, crude futures fell for the third day in a row to the low of $67.85/bl after EIA reports showed that 3.63 million barrels have been added to the US inventories. Safe haven flows spiked gold to the high of $1,832.10/oz before settling lower around $1,811.33/oz as New York closed. Worse than expected job numbers might delay Fed’s tapering, hence lower yields yet higher inflation, prompting investors to bid on the precious metal.

In the FX space, King Dollar benefits from the safe haven flows as short to long term accounts demand the world reserve currency. Nevertheless, short to medium term accounts prefer Kiwi, Swiss, Aussie and Yen than the Greenback, signaling cautious markets as sentiments dipped further. Jobless claims on Thursday and NFP on Friday would seal the next move for the Dollar, before inflation numbers come to light next week.

OUR PICK – No New Pick

No new pick as we had three losses in a row. The law of supply and demand says, prices increase when there is more demand than supply and vice versa. However, we know that this is not always the case. There had been times when there was limited or less demand, yet price increased anyway or vice versa. Case in point are bonds and stocks behavior for the past few months. 10Y and 5Y yields have been trending down since the highest in April, which means prices have increased amid higher demand. The same, however, can’t be said about stocks. Since April major indexes have been rising, yet demand aka funds flows are falling (outflows). Indeed, only 1 out of 12 weeks that we observed inflows to the US equities markets. What’s going on? Stay tuned!

Trades updates:  We will continue to accumulate AUY as the stock now pays dividends yielding 2.60% at current price, we remain bullish T and will accumulate as dividends yields now at 7.47%, we remain bullish COG and will accumulate as dividends yields now at 2.77%, we remain bullish CLVS, VIPS while bearish GPRO, APA, and GE. (Note: APA pays 0.56% while GE’s dividend yield is at 0.31% and CLVS, VIPS and GPRO currently does not pay any dividends)

Disclaimer:

This article is for general information purpose only. It is not an investment advice or a solicitation to buy or sell any securities. Opinions expressed are of the authors and not necessarily of MFM Securities Limited or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.