Financial Markets: Choppiness and volatility continue!

US private employers hired less workers than anticipated during the month of February, suggesting that the labour market is struggling to regain strength despite the improving pandemic figures. Private payrolls increased by 117,000 jobs last month, as reported by the ADP National Employment Report on Wednesday. The data for January was revised up in order to show 195,000 jobs added instead of the initially reported 174,004 the month.

While the correlation between ADP and the Non-Farm Payroll figures, the official government figures, tend to be tenuous at best, it can give traders an idea as to whether or not the Non-Farm Payroll figures on Friday will come in as expected, or perhaps miss the mark. Unfortunately, the number of Americans filing initial claims for weekly state unemployment benefits is still far above the 665,000 peak during the Great Recession of 2007-09. Previously, the labour market has begun to show signs of regaining traction after the COVID-19 number started to drop.

Recently, there has been quite a bit of speculation as to whether or not OPEC+ would boost production due to higher prices in the crude oil market heading into April. However, sources familiar with the negotiation between oil ministers are suggesting that perhaps the recent production cuts will remain in effect for the month of April, despite the fact that some traders have been expecting crude oil production increases due to an overheated market.

OPEC+ may be watching the US shale production numbers, as higher prices will certainly flood the market with US-based crude oil. Shale production has been a major thorn in the side of OPEC for several years, as they now have to worry about prices being high enough to make shale extraordinarily profitable. Oil ministers from OPEC+ are due to meet on Thursday, and any announcement coming out of that meeting will obviously have a major influence on the supply/demand equation when it comes to the crude oil markets.

The US dollar has fallen on Wednesday as investor sentiment improved, and government bond yields have continued to retreat. Commodity-linked currencies are holding onto recent gains, as seen by the Canadian dollar and Australian dollar markets. Global stocks have seen a relatively significant push towards optimism over the last 24 hours, as a jump in government bond yields had played havoc with global portfolios.

The Federal Reserve is more concerned about the speed of the move of bond yields than the actual move itself, as seen by comments coming out of Jerome Powell, as well as several of the regional governors in recent speeches. With that being said, traders are feeling a bit more confident about stepping out into the risk curve, as it appears that the interest rates rising in America are based more upon the idea of the “reflation trade” than any type of economic concern. Nonetheless, if the 10-year yields continue to rise rapidly, that could throw another monkey wrench into trading.