Gold prices jumped this morning, reaching for the $1,200 mark after trading flat to start the week. Overnight weakness in precious metals was spurred by upbeat inflation numbers out of Germany, which caused weakness in the euro and British pound. This pushed the dollar into positive territory, limiting the upside for precious metals. Anxiety over possible disruptions of international trade due to protectionist policies espoused by President Trump has both platinum and palladium more than 1% lower in early trading.
This week promises to be even more volatile than first expected, as Trump’s surprise ban on citizens from certain Muslim countries causes chaos at major airports. The move has been greeted by mass protests on the East and West Coasts, but Trump supporters in the American heartland wonder what the fuss is all about. After all, they say, Trump promised all throughout the presidential campaign that he was going to restrict immigration from Middle Eastern countries which had an active terrorist presence.
Stocks are seeing their worst start of 2017 this morning, opening sharply lower, then falling more than 1% soon afterward. The Dow and S&P 500 are being weighed down by energy stocks, as traders grow afraid that US fracking operators will erase any oil supply deficit brought on by the “grand bargain” between OPEC and major non-OPEC oil exporters to cut production.
Today’s big losses in the equity markets follow a lackluster Friday, which saw the Dow and S&P 500 ran out of steam after a week that saw new records. Most notably was the Dow closing above 20,000 for the first time. For the week, the Dow gained 1.3%, the S&P ended 1.9% higher, and the Nasdaq booked a 1.9% gain. Part of Friday’s softness in stocks were disappointing forth quarter GDP and durable goods orders.
Those unimpressive numbers gave Treasuries a boost Friday, with the yield on the benchmark 10-year bond settling 2.8 basis points lower at 2.480%. This was off from the gains it saw immediately after the GDP report.
Three of the four major central banks have monetary policy meetings this week, which is almost guaranteed to add even more volatility to markets. The Bank of Japan and US Federal Reserve both begin two-day policy meetings tomorrow. Both will release their conclusions Wednesday. The Bank of England will meet Thursday.
Another report that traders will anxiously await is the December US non-farm payrolls report on Friday. This will be preceded by the ADP private sector payrolls report on Wednesday. Even though the ADP report does not include data from local, state, of Federal governments, it is considered a bellwether for non-farm payrolls.
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