It's back to focusing on the Fed again. And this time, this comes as many push expectations for a rate hike. Friday’s poor jobs report has made the most of the major investment banks re-evaluate their position on the Fed rate hike, as it now seems that the general consensus has dramatically shifted from October or December of this year to March of next year.
Markets have taken this as a positive sign, and have used the prospect of further easing in the economy as a chance to get back to the risk on trade. It is giving us a positive start to the new month and the last quarter of the year – a quarter that is historically a bullish one. So with a kick in the opening week from the payrolls, we could be looking at history repeating itself.
It is getting boring having to put so much emphasis on central banks all the time. However, markets appear to have very little choice in the matter. So what does last week’s data mean for the rest of the week? For starters, it tells us that the way markets have been reacting to data is changing.
Read more: What gold tells us about a Fed rate hike
Over the last couple of weeks, before the jobs report, we had seen markets support a rate hike, with key breakouts – hawkish data supported by the rallying of equity markets. It now seems that the major indices, most notably the Dow and S&P, have decided that a rate hike is a bad thing, and a delay for whatever reason is going to be met with upside. Add this shift in sentiment to the fact we are now in the fourth quarter, and it could well be that we are on a charge to the end of the year.
ETORO INVESTMENT ANALYST
The Volkswagen issue may have drifted out of the headlines for the time-being. However, we are still seeing the ramifications and fallout through the markets. On the eToro platform, we have seen the number of people trading the company’s shares jump by 10,000 per cent, with those going short on the stock also growing by 10,000 per cent.
The majority of the traders are from Germany and the UK, with the average weekly volume from those countries alone jumping by over 8,000 per cent. So while we could be forgiven for thinking the impact of the news has already been felt, these numbers show that clients are expecting a lot more to come.