From Marc Chandler at Bannockburn Global Forex:
Overview: There are three main developments. First, the market is digesting the implication of the US employment data, where the optics were strong (336k increase in nonfarm payrolls compared with 170k median forecast in Bloomberg and Dow Jones surveys) but some details were disappointing (like the third consecutive decline in full-time posts, seasonally adjusted). Second, Chinese mainland market re-opened after a six-day holiday). Chinese stocks slipped and currency strengthened. The third, and most significantly is Hamas's bold and brutal thrust into Israel and the Israeli response. There three levels of analysis that seem particularly relevant. First, it does not seem coincidental as US-Saudi Arabia-and Israel were working toward a new agreement that some forces (including Iran) sought to disrupt it. Second, it may be part of a larger pattern of flaring up of tensions in several places including Nagorno-Karabakh and Kosovo and Serbia. Some have suggested that Russia is fanning the flames to sap the strength of the alliance it faces in Ukraine. Others frame it as a result of a distracted America. The third level of analysis is in the escalating tension between Israel and the Palestinians in Gaza and the West Bank. The next day to two may clarify whether Hezbollah, Iranian militias in Iraq and Syria, and Palestinians from elsewhere join the fighting. Oil prices jumped on concern of supply disruptions. November WTI settled near $84.65 and gapped higher, opening at $85.25 before rallying to about $87.25. It is now hovering around opening levels.
We had thought that the dollar was set for a setback as the rally since mid-July looks exhausted. The price action today does not negate it, and often political developments shape but do not derail the underlying trend. The Japanese yen, where markets are closed today, Norwegian krone, and Canadian dollar are a little firmer, while the euro and sterling have been trading around 0.4% lower in late European morning turnover. Emerging market currencies are mostly lower. The Chinese yuan's modest gains lead the complex. Asia Pacific equities traded lower, but Europe's Stoxx 600 is slightly higher after rallying the past two sessions. US index futures are nursing small losses. European benchmark 10-year yields are mostly 2-3 bp lower. Italy is an exception with the 10-year yield rising by a couple of basis points. Gold posted a potential key reversal before the weekend and gapped higher today in reaction to the weekend developments. It had approached $1810.50 before the weekend and settled at $1833. Gold opened slightly above $1846 and rallied to $1855.50 before stabilizing. The next target is around $1862-3.
Asia Pacific
China's markets re-open from the extended national holidays while Japan, Taiwan, and South Korean markets were closed....
....MUCH MORE
