The Australian sharemarket should follow US and European sharemarkets lower on Monday, giving up half of Friday’s gain. Investors are cautious ahead of the start of US earnings season. Australian investors will also be focused on upcoming economic data, especially jobs data on Thursday.
In US economic data, non-farm payrolls (employment) rose by 252,000 in December, ahead of forecasts for a gain of 240,000. The unemployment rate fell from 5.8 per cent to 5.6 per cent. And average earnings fell by 0.2 per cent, short of forecasts for a 0.2 per cent gain. And wholesale sales fell 0.3 per cent in November with inventories up 0.8 per cent.
European shares fell on Friday. Shares in energy stocks fell as oil prices fell again. And shares in Spain's Santander bank fell by 13 per cent after announcing a discounted capital increase, weighing on banking shares more broadly. The FTSEurofirst 300 index fell by 1.7 per cent to end the week down 1.1 per cent. The German Dax fell by 1.9 per cent and the UK FTSE fell by 1.1 per cent. In London trade shares in BHP Billiton lost 0.8 per cent while Rio Tinto fell by 1.4 per cent.
US sharemarkets gave back just over half of Thursday's gain on Friday. Economic data was mixed and some traders took profits ahead the start of earnings season. The S&P retail index fell 1.7 per cent on soft reports by retailers. The Dow Jones fell by 170 points or 1.0 per cent with the S&P 500 index down by 0.8 per cent and the Nasdaq fell by 32 points or 0.7 per cent. Over the week the Dow and Nasdaq lost 0.5 per cent and the S&P 500 lost 0.6 per cent.
US treasuries rose on Friday (yields lower) as jobs data confirmed that the Federal Reserve doesn't need to rush with rate hikes. US two-year yields fell by 5 points to 0.57 per cent while US 10-year yields fell by 7 points to 1.95 per cent. Over the week US two-year yields fell by 10 points and US 10-year yields fell by 9 points.
Major currencies rose against the greenback in European and US trade on Friday. The Euro rose from lows near $US1.1760 to highs near $US1.1845 and ended US trade near the highs. The Aussie dollar rose from lows near US81.10c to highs around US82.05c and ended US trade near the highs. And the Japanese yen lifted from 119.73 yen per US dollar to ¥118.42 and was near ¥118.50 in late US trade.
World oil prices fell on Friday but recovered from lows late in the session after data showed a sharp drop in the oil rig count. Baker Hughes reported that the number of rigs drilling for oil in the US fell by 61 this week, the biggest weekly fall in 24 years. Brent crude fell by US85c or 1.7 per cent to $US50.11 a barrel while the US Nymex crude price fell by US43c or 0.9 per cent to $US48.36 a barrel. Over the week Brent fell by $US6.31 or 11.2 per cent and Nymex fell by $US4.33 or 8.2 per cent.
Base metal prices were lower by up to 1.6 per cent on the London Metal Exchange on Friday. Nickel led the declines but lead bucked the trend, up 1.0 per cent. Over the week metal prices fell up to 2.4 per cent but nickel gained 3.2 per cent. Gold rose on Friday in response to weaker equities and a softer greenback. The Comex gold futures price was up by $US7.60 an ounce or 0.6 per cent to $US1,216.10 per ounce. Over the week, gold rose by $US29.90 or 2.5 per cent. Iron ore fell by US80c to $US69.80 a tonne on Friday and fell by $US1.40 over the week.
Ahead: In Australia, housing finance and job advertisements data are released. In the US, no major economic data is released. Alcoa releases its earnings results to kick off earnings season.
Craig James is chief economist with CommSec.