Kristal Daily Brief- Sep 5

Goldilocks in the US vs the looming energy crisis in Europe.

The August jobs report was good news for the Fed's Goldilocks scenario of lowering inflation without causing a recession, with strong hiring and moderating wage growth. Even though the monthly non-farm payroll gain at 315k was extremely robust, a jump in prime-age labor participation helped contain wage-growth.

As a result, the market scaled back expectations of a 75bp rate hike in the next FOMC as 2y Treasury Yields closed 11bp lower at 3.385% and 10y yields dropped 7bp to 3.19%.

Equities rallied on the numbers initially but gave up the gains later as Russian State gas producer Gazprom said it would indefinitely halt supplies through a key pipeline to Western Europe. That caused the European equity futures to tumble and the negative sentiment rubbed off on their transatlantic brethren too. All 3 major indices closed the day 1+% lower and 3+% lower on the week.

Dollar struggled to hold onto its earlier gains post the NFP but has got fresh wind after this Gazprom news hit the wires and has started the week on a strong footing too. Only last week, we were wondering where the impetus for the next Usd leg move higher will come from and looks like our candidate is right here.

?Oil sold off more than 10% last week but opened up better bid this morning on expectation that OPEC may decide to trim production in its meeting later today.

Outside US, the tone of discussions surrounding the European Central Bank's next interest rate decision on Sep 8 seems to have shifted to a more hawkish 75bp hike outcome, Britain will have a new Prime Minister on Monday and China's August PMIs confirmed signals from high-frequency data that the economy continued to lose speed over the summer.

Stay cautious & Happy Investing!

“Never act upon wishful thinking. Act without checking the facts, and chances are that you will be swept away along with the mob.”

Jim Rogers

Disclaimer: views and commentary are as at the date of which it is published and the company is not obligated to issue any communication should this view or commentary vary, differ or diametrically change and the reader should assume that the information is not up to date and shall not make reliance on the information for any investment decision.?