CMC Markets Weekly Report

An encouraging U.S. jobs report propelled blue-chip stocks to their highest level since October 2007 on Friday, closing above the closely watched 14,000 bulwark as investors momentarily sidelined their concerns about the recovery.

The government reported that nonfarm payrolls rose 157,000 in January, while the unemployment rate inched up by a tenth of a point, to 7.9 percent. The figures were in line with Wall Street forecasts, with most analysts expecting the figures to bolster the Federal Reserve's plans to inject the economy with massive stimulus.

The Dow Jones Industrial Average rose by more than 150 points, ending the day above 14,000 — its highest level in more than five years and less than 200 points away from an all-time high. The S&P500 index rose by about 15 points, ending above 1,513, while the Nasdaq added nearly 37 points to close above 3,179.

The rally was pushed higher by December construction data and better than expected U.S. manufacturing data, which confirmed generally buoyant global manufacturing data reported during overseas trading hours.

The employment report came as welcome news in a market that was jolted earlier this week by an unexpectedly weak GDP report. While most corporate earnings have been stronger than expected, some market watchers have begun to worry that the recovery was losing steam.

Corporate America is in the thick of earnings season, most of which have met or exceeded expectations and helped keep a floor under major benchmarks. Still, most companies remain cautious about the outlook for 2013, as battles over taxes, spending and debt heat up in Washington with little immediate resolution in sight.

In commodity markets, oil prices finished higher on Friday in New York, buoyed by greater optimism about global growth following encouraging indicators from the U.S. and China. A barrel of West Texas Intermediate, the U.S. benchmark, settled 28 cents higher at $97.77 on the New York Mercantile Exchange. Even stronger was the price of European oil benchmark Brent futures, which closed at $116.76 a barrel on the Intercontinental Exchange, up $1.21.

Gold futures settled have higher as investors continued to watch economic data for clues about the Federal Reserve's policy stance. The most actively traded contract, for April delivery, on Friday rose $US8.60, or 0.5 per cent, to settle at $US1,670.60 a ounce.

Base metals have closed higher on the London Metal Exchange (LME), boosted by stronger-than-expected U.S. manufacturing data. At the close of open outcry trading on Friday, LME three-month copper was up 1.5 per cent at $US8,290 a metric ton, its highest close in four months. Aluminum ended the session 1.7 per cent higher on the day at $US2,125/ton.

In currency markets, the Euro and commodity currencies drifted higher against the U.S. dollar in European and U.S. trade on Friday. The Euro held between US$1.3585 to US$1.3710 and was near US$1.3640 at the U.S. close. The Australian dollar is higher following rallies on U.S. share markets on Friday night. At 8.30am the currency was trading at $US1.0422, up from $US1.0399.

Making news in Australia this week, we have building approvals, job ads, the monthly inflation gauge and car sales data is released today. Tuesday, AIG performance of services index for January, ABS house price index and RBA rates meeting. It will be the first rates meeting of the year for the RBA. A Bloomberg survey of expects the official cash rate to be kept on hold at 3 per cent, with only four of the 28 respondents forecasting a rate cut to 2.75 per cent. Wednesday, we have retail sales for December. Thursday, AIG performance of construction index for January, NAB business confidence for December quarter, and official jobs data for January. Friday rounds off the economic week with RBA statement on monetary policy.