CMC Markets Weekly Report

Stocks in the U.S closed out the week out strong, with the S&P 500 finishing above 1,600 and the Dow briefly topping 15,000 for the first time, as Wall Street cheered a better-than-expected April nonfarm payrolls report.

Stocks in the U.S closed out the week out strong, with the S&P 500 finishing above 1,600 and the Dow briefly topping 15,000 for the first time, as Wall Street cheered a better-than-expected April nonfarm payrolls report.

The Dow Jones Industrial Average shot up 142.38 points, or 0.96 percent, to close at 14,973.96, crossing above 15,000 for the first time. The S&P500 soared 16.83 points, or 1.05 percent, to finish at 1,614.42. The Nasdaq rallied 38.01 points, or 1.14 percent, to end at 3,378.63.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, slumped below 13.

U.S. employers added 165,000 jobs in April, according to the Labor Department, while the unemployment rate fell to a four-year low of 7.5 percent. Economists in a Reuters poll expected a reading of 145,000 and unemployment to hold steady at 7.6 percent. Non-farm payrolls came in at a disappointing 88,000 in March.

The unemployment rate remained well above the 6.5 percent level at which the central bank has said it will start raising interest rates. On Wednesday, the Fed said it was prepared to �increase or reduce� the monthly pace of its $85 billion in bond purchases, depending on economic conditions.

Global markets cheered the employment report, with European shares turning higher and the dollar jumping against the euro and yen.

However, other economic reports were not as encouraging. The rate of growth in the U.S service sector slowed in April, according to the Institute for Supply Management, hitting its weakest pace in nine months. Factory orders posted their biggest decline in seven months, according to the Commerce Department. However, Wall Street largely shrugged off both weaker-than-expected data.

More than 80 percent of S&P 500 companies have posted quarterly results so far, with 68 percent topping earnings expectations and 21 percent missing forecasts, according to Reuters. If all remaining companies post numbers in line with estimates, earnings will be up 5.2 percent on last year.

On average, sales have come in 1 percent below estimates, with only 46 percent of companies beating their revenue projections.

The U.S dollar fell against the Euro and commodity currencies in European and U.S trade following the release of U.S jobs data. The Euro lifted from lows near US$1.3035 to around US$1.3155 before ending U.S trade near US$1.3115. The Aussie dollar rose from lows near US102.40c to US103.25c and ended U.S trade near US103.15c.

In commodity markets, Oil prices surged after an unexpectedly upbeat U.S jobs report eased concerns about the strength of the world�s largest economy and major energy consumer. New York�s main contract, West Texas Intermediate for June, settled at $US95.61 a barrel on Friday, up $US1.62 from Thursday�s closing level. The European benchmark, Brent North Sea crude for delivery in June, rose $US1.34 to $US104.19 a barrel in London trade

Gold futures ended slightly lower as investors weighed the continued demand for physical gold against brighter economic data, which could curb interest in gold over the longer term. The most actively traded contract, for June delivery, settled down $US3.40, or 0.2 per cent, at $US1,464.20 a troy ounce on the Comex division of the New York Mercantile Exchange. The contract is up 0.7 per cent on the week. Gold had plunged to $US1,455.40 a troy ounce after monthly data showed consistent growth in the U.S labour market.

Copper led the London Metal Exchange (LME) to a stellar close, after the European Central Bank�s (ECB) rate cut and upbeat U.S employment data spurred a massive short-covering rally in the recently heavily sold base metals. At the close of open-outcry trading, LME three-month copper was up some 6.2 per cent on the day at $US7,270 a metric ton, having been dragged out of a bear market by a strong surge of short-covering aided by a stronger euro, heightening the appeal of the U.S dollar-denominated metals to euro holders.

In the week ahead, Australia can expect an onslaught of economics news today ahead of a meeting of the Reserve Bank tomorrow to decide on the level of official interest rates. Financial markets are pricing in a 57 per cent chance of a 25 basis point cut tomorrow, according to Credit Suisse data. In a Bloomberg survey of 29 economists, nine of those surveyed predicted rates would be trimmed to 2.75 per cent.

On Thursday, the spotlight moves to NAB which reports first half earnings. The bank follows ANZ and Westpac which both reported higher earnings and a special dividend.

In the U.S, the unemployment trends report is released today followed by consumer credit on Tuesday. Wednesday its MBA mortgage applications and oil inventories, Thursday BoE announcement, jobless claims and wholesale inventories. Friday rounds off the week with a speech from Bernanke and the release of the treasury budget.

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