A day of consolidation ahead of US employment data

Markets look set for a day of consolidation as traders mark time waiting for tonight’s US jobs data.

Markets look set for a day of consolidation as traders mark time waiting for tonight’s US jobs data.

Stock market valuations around the world are now at least to some extent dependant on the low interest rate regime continuing. So all eyes will be on tonight’s US employment data which has the capacity to influence thinking on the timing and pace of Fed plans to lift US rates. At this stage, inflation is likely to be the key influence on Fed thinking. This means that data on wage growth could be the most important feature of the US employment data.

While a steady market looks the most likely scenario for today’s trading, technical traders will be watching the support level around 5880 in the ASX 200 index. Any break below that could start developing some self-fulfilling downward momentum with nervous profit takers prompted to take action on stock which have been pushed up to relatively high valuations in recent months.

Last night’s ECB news and yesterday’s announcement of China’s 2015 growth target were largely in line with market expectations but point to marginal risks in opposite directions. The ECB’s increased 2015 growth forecast indicates some upside potential for markets as Europe benefits from cheaper oil prices and a weaker currency.

China’s lower 7% growth forecast carries the risk of some undershooting as the economy continues to grapple with excess capacity in property and heavy manufacturing, together with a currency that has been dragged higher by a resurgent US Dollar. News that the iron ore price slipped below $60 is a reminder of concerns over China’s economy.

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