Stocks in the U.S finished deeply in negative territory Friday, after the government reported that hiring slowed in April, fuelling worries over the strength of the economic recovery. The Dow Jones Industrial Average fell for a third-consecutive session, tumbling 168.32, or 1.27 percent, to close at 13,038.27. The S&P500 fell 22.47, or 1.61 percent, to finish at 1,369.10 whilst the tech heavy Nasdaq plunged 67.96, or 2.25 percent, to end at 2,956.34.
Non-farm payrolls rose much less than expected, with employers adding just 115,000 jobs in April, well below expectations for 170,000 according to a Reuters survey. Still, the unemployment rate slipped to 8.1 percent, hitting the lowest since January 2009.
Oil prices dropped sharply to settle near $98 a barrel, pressured by the jobs report.
Despite the disappointing report, traders say the jobs number was not weak enough to force the Fed's hand on a new round of stimulus, which has been a positive catalyst for stocks.
Over in Europe, Socialist Francois Hollande has claimed victory as the new president of France, introducing a new phase of eurozone uncertainty. He has vowed to renegotiate the strict eurozone-wide austerity pact championed by German chancellor Angela Merkel and supported by former French president Nicholas Sarkozy. Hollande has already indicated his first foreign meeting will be with the chancellor. Hollande ran on a ticket of lifting the strict budget measures and encouraging economic growth.
In Greece however, the result of yesterday's election remains unclear. With counting still underway the coalition appears to have gained less than a third of the vote, suggesting any government able to be formed would be fragile and unstable at best.
Markets in the Eurozone finished in negative territory on Friday ahead of the elections.
There was a silver lining for Australia on Friday, with the Aussie falling 0.9% to US$1.0174. The problem for the Aussie, nevertheless, is that the introduction of further monetary stimulus in Europe and/or the US will put a floor under the currency despite the RBA having moved into an easing phase.
Concerns on both sides of the Atlantic had the US dollar index rising 0.3% to 79.49, while macro uncertainty saw gold defy the dollar in rising US$6.40 to US$1642.30/oz. The yield on the US ten-year bond fell 4bps to 1.88%.
It will be a big week in Australia. The rebuilding of euro-fear in recent weeks provided the RBA with sufficient excuse to deliver a domestically-driven 50bps rate cut last week, and the situation has only now deteriorated globally. With disappointing manufacturing and service sector PMIs of 43 and 39 respectively being achieved in April, economists are expecting the next cut in rates to come as early as June. There is a lot of data due out this week to provide further indication of Australia's economic position, and tomorrow night the Federal government will bring down its own “austerity” budget in its relentless pursuit of a fiscal surplus.
Today sees the local construction PMI, retail sales, building approvals, ANZ job ads and the NAB business confidence survey. Tomorrow brings the March trade balance, as well as the budget. On Thursday China will reveal its trade balance for April after Australia sees the latest unemployment numbers, then on Friday the monthly Chinese data-dump will provide inflation, industrial production and retail sales numbers. When will Beijing take another step in policy easing? The odds must be firming.
This week also sees trade balance numbers from Germany, Japan, the UK and the US, and on Thursday night the Bank of England will hold a monetary policy meeting. The UK markets are closed tonight for a public holiday, which means no base metal trading in London.
It's a quieter week in the US, with consumer credit tonight, wholesale trade on Wednesday, the trade balance on Thursday, and the PPI and fortnightly consumer sentiment measure on Friday.
On the local stock front, Orica (ORI) will report its interim result today while National Bank (NAB) will follow suit on Thursday.