The precious metals bore the brunt of traders' wrath on Wednesday, losing ground due to profit-taking and renewed exuberance for equities. The main driver of this momentum shift was the release of yet another exceptionally good jobs report from ADP this morning.
Meanwhile, platinum and palladium were actually higher, however. The latter advanced 1% to about $820/oz, its highest in 13 months.
Private Payrolls Beat Expectations
Ahead of Friday's critical nonfarm payrolls report, today's ADP report on private payrolls provided the markets with a preliminary picture of hiring trends during March. The data showed that the private sector added 263,000 jobs last month, though February's eye-popping 298,000 figure was revised downward. The private-sector payrolls numbers for March far exceeded the consensus expectation of 185,000 new jobs.
The stock markets opened solidly higher at the opening bell, with the Dow Jones Industrials leading the way 0.4% higher. This same trend was observed across the globe, and stock indices around the world were likewise strongly in positive territory. Despite the rush into equities, the bond market didn't see any significant sell-off. The 10-year Treasury yield held steady at 2.36%.
Given the persistence of safe-haven demand, it's likely that the shift toward stocks will be coupled with a certain degree of investors hedging their bets. One example of this was a surge for the Japanese yen, which is traditionally considered a safe haven along with other assets such as gold and the Swiss franc. The yen gained roughly 0.4% against the U.S. dollar this morning, hitting its highest in more than four months at ¥111 per dollar.
On a more general basis, the USD moved slightly lower against a basket of its peers, slipping to 100.5 on the DXY index. This stumbling block for the dollar (and flight into the yen) was partly attributed to the news this morning that North Korea launched a test missile from its east coast this morning, adding fuel to an already alarming geopolitical fire.
Moreover, this comes just a day before President Trump will host his Chinese counterpart, President Xi, at Mar-a-Lago to discuss a wide range of issues concerning the world's two largest economic powers. Among the topics on the docket for the two leaders is, of course, how to best handle the North Korean quagmire. Additionally, crafting a more equitable trade policy between the two nations has been one of the key issues Trump has taken up since the early days of his presidential campaign. Last year, the trade deficit between the U.S. and China totaled approximately $350 billion (in China's favor).
In other economic news, crude oil prices continued to rally as multiple factors continue to contribute to an easing of the global supply glut. Both WTI crude and Brent crude advanced 1.5% on Wednesday morning, pushing the latter to a one-month high of $55/bbl.
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