Daily Market Outlook - Thursday, Feb. 6 -

Daily Market Outlook – Thursday, Feb. 6

Feb 06, 2025Jeremy ParkinsonFinance0

Image Source: Pixabay
Asian stocks hit a seven-week peak as Wall Street experienced a surge in both stocks and bonds amidst a backdrop of tariffs, lacklustre technology earnings, and mixed economic indicators from the US. Shares in China rose as the Yen gained strength. The MSCI index rose for the third consecutive day, while US market futures ticked higher after the S&P 500 and Nasdaq 100 both made gains on Wednesday. Indian stock indices saw declines, while equities in Hong Kong and mainland China rebounded, recovering from Wednesday’s drop. Treasuries declined after a significant jump overnight. Thursday’s stability contrasts with the market’s Monday meltdown, when Trump decided to impose and then delay tariffs on Canada and Mexico. The US enacted a 10% tariff on all imports from China, leading China to retaliate with some tariffs on US goods. The inconsistent policy measures from the US have dampened investor enthusiasm, with traders weighing the risks of tariffs against the likelihood of improved monetary conditions. Philip Jefferson, Vice Chair of the Federal Reserve, expressed his willingness to maintain the central bank’s policy rate at its current level until there is greater clarity regarding the policies of the Trump administration. Nevertheless, U.S. Treasury yields remained close to their lowest levels in over a month on Thursday, influenced by mixed economic data and a tendency among investors to seek safety due to uncertainties surrounding Trump’s tariff policy and the potential for escalating trade conflicts.The Yen surrendered most of its earlier gains against the Dollar. Tamura, the Bank of Japan’s most hawkish board member, informed journalists that a 1% rate is not necessarily the neutral rate for the economy, highlighting that the upward risk to prices is gradually escalating. Additionally, hedge funds are ramping up their demand for the Yen as the currency markets become increasingly unpredictable.In the UK, the GDP outlook is less optimistic, but short-term inflation is limiting the degree of dovishness expected from the Bank of England today. An 8-1 vote is expected to reduce the Bank Rate by 25 basis points to 4.5%, and this is the most likely outcome from today’s MPC meeting. Therefore, the market will be focused on the tone of the minutes and the updated forecasts in the February Monetary Policy Report. It’s important not to overlook potential downward adjustments to the GDP projections, including a lower than anticipated starting level (as indicated in the chart) and slower growth anticipated this year. The annual supply-side review will be released, and unless there are major surprises, the overall impact of these projections is expected to reveal earlier than expected spare capacity in the economy, partly due to a weaker employment outlook. This may alleviate inflation concerns in the two-year timeframe, potentially bringing it to or just below the 2% target. In theory, this should communicate to the market that it can feel a bit more at ease with the previously hinted perspective that ‘gradual’ easing corresponds to four rate cuts of 25 basis points each by 2025. However, with around 85 basis points of the anticipated 100 basis points already factored in, compared to approximately 70 basis points earlier last week when we shared our preview, it appears that there isn’t much room left for a dovish surprise. Moreover, many might remain cautious about becoming overly optimistic regarding rate cut expectations due to higher-than-targeted near-term CPI forecasts, excessive wage growth, and concerns about tariffs.Key events on today’s macro slate include the Bank of England’s interest rate decision, the UK construction PMI, euro area retail sales data, and US initial jobless claims. Additionally, speeches from ECB’s Joachim Nagel and Fed’s Christopher Waller are set to draw attention from markets. Markets will scrutinise Amazon’s earnings report due to the high expectations for cloud computing, especially after the weak results from Microsoft and Alphabet affected investor confidence in Big Tech’s AI investments. Options pricing indicates a potential share price move of up to 8% following the results. Investors are also monitoring comments from executives regarding Trump’s “de minimis” exemption change for imports under $800, which could benefit Amazon by hampering Chinese competitors.
Overnight Newswire Updates of Note

Gradualism To Persist As BoE Delivers First Cut Of The Year

Fed Notes A Lot Of Uncertainty In Trump’s Policy Moves

Fed’s Jefferson: High-Pressure Job Markets Ease Inequalities

BoJ’s Tamura: Rate Should Be At Least 1% In H2 FY25

Australia’s Dec Trade Surplus Decreases To 5,085M (prev 7095M)

China Tariffs May Already Be Hiking Up Import Fees

Tariffs To Drive Global Markets In Volatile 2025, JPMorgan Finds

World Inflation At Risk Of Rekindling With Trump’s Trade War

USPS Reverses Suspension Of Inbound Packages From China, HK

Chipmakers Qualcomm, Arm Post Sales Rise On Smartphone Strength

MicroStrategy Unveils New Name, Reports BTC Ramp-Purchases In Q4

Trump’s Trade War Adds To ‘Clear Decoupling’ On C. Bank Cuts

Canada PM Summons CEOs To Break US ECN Dependence

(Sourced from reliable financial news outlets)
FX Options Expiries For 10am New York Cut (1BLN+ represents larger expiries, more magnetic when trading within daily ATR)

EUR/USD: 1.0300 (2.5BLN), 1.0310-15 (1.2BLN), 1.0320-25 (3.5BLN)

1.0350 (1.2BLN), 1.0370-80 (2.3BLN), 1.0390 (837M), 1.0400-10 (4.2BLN),

1.0415 (660M), 1.0430-35 (1.1BLN), 1.0440-50 (3.2BLN), 1.0450 (632M)

USD/CHF: 0.8950 (475M), 0.9000 (957M), 0.9050 (300M)

EUR/GBP: 0.8325 (370M), 0.8355-60 (743M), 0.8400 (1.4BLN)

GBP/USD: 1.2300 (1BLN), 1.2350 (648M), 1.2455 (1.4BLN)

1.2500 (361M), 1.2550 (1.2BLN)

AUD/USD: 0.6200-10 (806M), 0.6275 (570M)

AUD/NZD: 1.1040 (240M), 1.1075 (690M)

USD/CAD: 1.4200 (1.7BLN), 1.4270-80 (620M), 1.4370 (440M), 1.4400-10 (1.6BL)

USD/JPY: 151.95-152.00 (620M), 152.50 (1.3BLN), 153.00 (464M)

153.55 (500M), 153.90 (1.6BLN)

EUR/JPY: 159.30 (1.7BLN)

CFTC Data As Of 31/1/25

According to the CFTC positions report for the week ended January 28th, the British pound had a net short position of -21,672 contracts, while the euro had a net short position of -66,604 contracts. The Swiss franc showed a net short position of -43,000 contracts, while the Japanese yen had a net short position of -959 contracts.

In the cryptocurrency space, Bitcoin demonstrated a net long position of 1165 contracts.

On the equity fund side, CME net short positions for the S&P 500 increased by 3,073 contracts to 402,829, while CME net long positions surged by 29,242 contracts to 961,171.

Speculators trimmed the CBOT US 5-year Treasury futures net short position by 20,136 contracts to 1,776,055 contracts, while increasing CBOT US 10-year Treasury futures net short position by 120,397 contracts to 700,642 contracts. Moreover, speculators raised the CBOT US 2-year Treasury futures net short position by 27,182 contracts to 1,201,559 contracts and the CBOT US Ultrabond Treasury futures net short position by 11,604 contracts to 241,592 contracts.

In contrast, speculators raised the CBOT US Treasury bonds futures net long position by 4,128 contracts to 28,584 contracts. These position reports provide insights into market sentiments and trends, pointing towards potential future developments and opportunities in different market segments.

Technical & Trade ViewsSP500 Pivot 6040

Daily VWAP bullish

Weekly VWAP bullish

Seasonality suggests bullishness Into Feb 6th

Long above 6075 target 6195

Short Below 6045 target 5743

EURUSD Pivot 1.0435