In the new week, the yield of 10-year government bonds will have the biggest impact on stock markets. The corrective movements in US markets this year are due to bond yields that have risen and are close to the 3% key level - playing the role of a possible turning point in the stock market. Therefore, any increase of more than 3% in yield will lead to serious sales of US stocks and vice versa, any downgrades from this point will lead to an increase in indices.
In the past, two or three consecutive weeks of declining shares and, at the same time, bonds was extremely rare. The last time the markets, together with the bonds, entered such a correction was in 2004, and in the last 20 years it has only happened 3 times. Such deviations are extremely rare but provide a perfect opportunity for investors to position themselves with long positions at a lower price as history shows that in any such market behavior, after Selloffs, the stock price reaches the last formed peak before it. Despite the impeccable historical data, this may be a warning sign of a subsequent crisis, as the economic cycle is evolving and ending. Taking into account the way the central banks take over, namely the withdrawal of massive government and corporate bond purchase programs, everything will depend on consumer behavior from now on.
Investors are so negative about 10-year bonds that it may get out of hand. What is worrying most analysts at JP is that short positions on futures markets are at levels not seen before. And history shows that when the market is so big, investors see only one opportunity for profit. Also, investors seem to have forgotten everything and turned their attention to rising US inflation. Assuming that short investors have run out, there is hardly anyone to continue selling. But what of this? Now the high yield and low price of bonds is attractive for investors looking for a fixed return, and this will have a positive impact on the price. A higher bond price will result in the closing of already losing short positions, and this will further boost the raise. If we witness Short Squeeze, the stock market is likely to find support, while the weakness of the dollar will remain in vogue.
In the new week, traders will focus on a bunch of economic news that will impact short-term movements on the FX market. The main ones are Gross Domestic Product data in the United States (Wednesday, 15:30) and Nonfarm Payrolls (Friday, 15:30). Last week Fed's report was released. In it, central bankers praised the strength at the core of the economy as well as the improving inflation. GDP data will test this, as analysts' expectations are for an expansion of the economy. Negative data here will be reflected in strong dollar selloff.
Economic calendar for next week - 26.02 - 02.03.2018
17:00 USA - New Home Sales
23:45 New Zealand - Trade Balance
15:30 USA - Durable Goods Orders
17:00 USA - CB Index of Consumer Confidence
01:50 Japan - Retail Sales
01:50 Japan - Industrial Production
03:00 China - Manufacturing PMI
09:00 Germany - Gfk Consumer Climate
11:00 Germany - Unemployment Rate
12:00 Europe - CPI
15:30 USA - Gross Domestic Product
17:00 USA - Pending Home Sales
17:30 USA - Crude Oil Inventories
03:45 China - Caixin Manufacturing PMI
10:55 Germany - Manufacturing PMI
11:30 UK - Manufacturing PMI
12:00 Europe - Unemployment Rate
01:30 Japan - Core CPI
09:00 Germany - Retail Sales
15:30 USA - Nonfarm Payrolls
15:30 Canada - Gross Domestic Product
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