Data Slows, Market Hesitant

Economic data is slowing and policymakers are highlighting more weakness, while markets attempt looking beyond the numbers. Markets are closely watching the deepening staff shortage in US hospitals (more below).  USD ended the week weaker against all major currencies, while DOW30 ends Friday lower as it did in 4 of the last 5 weeks.  10-year yield was capped below the Sep trendline resistance and VIX held above the 22 support. NASDAQ remain supressed at the 11990/00 trendline resistance, while   This week's Premium video explores the use of ETF flows vs Futures committments and how they back Ashraf's frequent gold and silver trades. 

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Thursday's initial jobless claims report showed went in the wrong direction with claims up 742K from 711K the week before. This was also reference week for non-farm payrolls so there is some weakness building towards that release in early December. Pandemic emergency claims also rose week-over-week – they're slated to expire at year end.

Other reports from the Philly Fed and on existing home sales were strong but the pandemic is likely to slow activity. The latest tracking data from JPMorgan shows lower credit card spending in person and in places like restaurants and hotels. The Fed's Mester also warned that economic data is slowing and Kaplan said we could have a return to negative growth in the near-term.

More virus economic curbs continue to roll in and New York now appears to be on the brink of closing restaurants and schools. Those worries briefly hit equities on Wednesday but they bounced from an early dip on Thursday.

US health authorities reported that 1 in 5 hospitals anticipated critical staff shortages within 7 days-- the highest shortage ratio on record amid surging Covid19 cases and hospitalisations. Shortages are worst in the Midwest.

The FX market also brushed off the worries as the dollar softened and commodity currencies rebounded from European weakness. The risk-sensitive Mexican peso also traced out an outside day in an impressive move.

The market isn't blind to the looming virus curbs, the coming dark winter and the economic pain of the virus but there's a clear message that on the current path, it's not going to derail positive sentiment. The market continues to look beyond the virus and dips on negative news about the current situation will be bought – that's the power of low interest rates.

More likely to move the market is weekend positioning in sterling. There's chatter about a Brexit breakthrough (as always) but we're getting to the point where there is two-way risk in that trade.