Weekly Market Update: US Gets "Goldilocks" Jobs Report; Brexit Redux and ECB Tapering Are Latest Worries for Europe October trade kicked off in an orderly manner but as the week progressed many of the same underlying cross currents returned to the surface resulting in market swings. WTI crude futures gained a foothold above $50 for the first time since early July helped by generally improved ISM data globally and large declines in weekly crude inventory figures. The British Pound continued to fall to fresh 3 decade lows largely on the backs of tough talk from various European officials surrounding Brexit. The move culminated in what many referred to as a "flash crash" into the Asian trading session on Friday. Cable trades briefly printed below 1.20, down some 10 big figures before rebounding into the US open.
Global rates backed up to some of the highest levels since the Brexit vote ahead of the US payrolls report on Friday, spooked in part by a mid-week report that suggested ECB was already discussion QE tapering scenarios. That report was later walked back by several ECB officials but sovereign bond prices never fully recovered. Friday's September payrolls report was described by several analysts, including Fed Vice Chair Fischer, as a "goldilocks" number, not too hot, not too cold. The implication was that the Fed will remain on hold in November and remains on track for a December rate move. The UK 10-year Gilt yield finished the week just below 1% while the 10-year Treasury held near 1.75%. Gold prices careened down through the 200-day moving average weighed on by higher rates and a resurgent US dollar.
Deutsche Bank remained in focus as each day saw vying press reports on the company's travails. Last week's lows held and hopes are the bank, along with US and German government officials can reach a path forward that will allow DB to recapitalize. Twitter shares topped $25 mid-week before sliding on reports that several potential suitors dropped out. The IPO market stayed hot, headlined by Coupa Software's 100% rise on Wednesday and word that the thawing market had both Snapchat and Bloom Energy nearing a filing. The week also saw the launch of Innogy, the largest IPO in the German stock market in nearly a decade. Disappointing annual guidance from Honeywell and Walmart weighed on the major US indices late in the week along with a steady rotation out of higher yielding defensive sectors. The S&P futures saw the 50-day moving average set up as notable resistance throughout the week's trade. For the week, the S&P500 lost 0.7%, the DJIA slipped 0.4%, and the Nasdaq fell 0.4%.