Capital Markets: "Jobs Friday: Asymmetrical Risks?"

From Marc to Market:

Overview: The first full week of 2020 is ending on a quiet note, pending the often volatile US jobs report. New record highs US equities on the back of easing geopolitical anxiety is a reflection of greater risk appetite that is evident across the capital markets. Asia Pacific equities mostly rose today, though Chinese shares and a few of the smaller markets saw small losses. The MSCI Asia Pacific Index rose about 0.2% on the week, the sixth consecutive weekly advance. European equities are up small for the fourth straight session. It is also the fourth weekly gain in the past five weeks and is sitting at new record highs. US shares are firm, and the Dow Jones Industrials are knocking on the 29000-level. Since the start of Q4 19, the S&P 500 has fallen in just three weeks. Benchmark 10-year yields are softer in Europe, with Italy's six basis point decline leading the way. The US 10-year is little changed on the day near 1.85%, holding on to around a five basis point increase on the week.

This week's nine basis point rise in the German 10-year yield was the largest rise among the major bond markets. The dollar remains firm against nearly all the major currencies. Although the Australian dollar is showing some resiliency today, the greenback is having its best week in about two months. The JP Morgan Emerging Market Currency Index is a little heavier for the second consecutive session, but on the week, it is up by about 0.25% and is the fifth week in the past six that it has appreciated. Gold continues to unwind its recent gains. After reaching a high near $1611 on the Middle East developments, it is trading below $1550 and is snapping a four-week rally. Oil, too, is paring its gains and is lower for the fourth consecutive session. February WTI hit $65.65 before reversing lower. It fell to nearly $58.65 yesterday and is consolidating above $59 today.

Asia Pacific
Japanese household spending fell 2% year-over-year in November. This was a little more than expected but showed what is likely to be a gradual recovery from the sales increase shock. Spending had collapsed by 5.1% in October. The government efforts to boost spending do appear to have mitigated the slump compared with the last time the sales tax was hiked (2014). Nevertheless, the Japanese economy seems to have contracted sharply in Q4 20, and the latest Bloomberg survey showed a median forecast of a 3.7% decline in overall output. Last month, the survey had a median forecast of a 2.6% contraction.

Australian retail sales in November rose by 0.9%, twice what economists had expected, and the October series was revised to 0.1% from flat....

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