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.
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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Frequently Asked Questions about this Article…
The US employment data is crucial because it can influence the Federal Reserve's decisions on interest rates. Changes in interest rates can significantly impact stock market valuations, making this data a key focus for investors.
Inflation is a major factor in the Federal Reserve's interest rate decisions. If inflation is high, the Fed might increase rates to cool down the economy. Conversely, low inflation could lead to maintaining or lowering rates to stimulate growth.
The ASX 200 index support level at 5880 is significant because if the index falls below this level, it could trigger a self-fulfilling downward momentum. This might lead to nervous investors selling off stocks, potentially causing a market decline.
The ECB's growth forecasts can positively impact European markets by indicating potential economic growth. For instance, an increased growth forecast suggests that Europe might benefit from factors like cheaper oil prices and a weaker currency, which can boost market confidence.
China's 7% growth forecast suggests potential economic challenges, such as excess capacity in property and manufacturing sectors. A lower growth rate could also be affected by a stronger US Dollar, impacting China's export competitiveness.
The iron ore price is significant for China's economy because it reflects demand in the construction and manufacturing sectors. A drop below $60 indicates concerns about China's economic health and its ability to sustain growth.
Technical traders analyze market trends and support levels to predict future movements. Their actions can influence market momentum, especially if key support levels are breached, leading to potential sell-offs or rallies.
Everyday investors can stay informed by following economic indicators like employment data, inflation rates, and growth forecasts. Keeping an eye on market news and analysis from reliable sources can also help in making informed investment decisions.
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