The US ADP Private Sector Jobs reported an extra 515,000 jobs were added, less than expected, but a positive number leading into the Non Farm Payroll number released at the end of the week. It was enough to push US equities into the positive, with tech stocks heading towards historical highs. The Biden administration is expected to announce a $2 Trillion Infrastructure plan, with another $1 Trillion to $2 Trillion ‘Green New Deal’. The massive blow out fiscal spending is a huge stimulus for the economy but is outrageous in terms of debt and deficit. The markets looks set to welcome the massive deficit spending, but this will come with consequences, which will be reflected on the balance sheet and in interest rates.
The fiscal extravaganza will allow the Fed to decelerate their massive monetary stimulus, but the Fed have only hinted at this and QE must continue, to ensure interest rates are suppressed. ‘Modern Monetary Theory’ in action. This could be the greatest discovery in economics for more than a century, or it may just be the same mistake made many times in the past, but on a far, far, grander scale? We shall see.
US 10 year Bond Yields continued to rise, reflecting the growth pressures and ignoring the Fed’s suppressive QE infinity program. The US Dollar drifted, with the EUR bouncing to 1.1730, while the GBP hit 1.3800, despite shocking GDP contraction numbers. The leading sector of housing in the US, continues to show signs of reversal and this could be a strong negative signal to the economic recovery.
The flagging reserve allowed the AUD to regain 0.7600, while the NZD traded below 0.7000, after a negative Business Confidence number. Markets close tonight, for the short Easter week and ‘triple witching’ should ensure a volatile close.