In the lead-up to US payrolls tonight markets took a bit of a breather, with little action anywhere. Well, outside of tech stocks and crude that is. The dataflow itself was positive, however, especially the non-manufacturing ISM which rose to 53.1 in March from 51.6. It was particularly positive to see the employment component surge in the month, up over 6 percentage points to 53.6. A good sign for payrolls tonight. Less positive was the 16,000 lift in initial jobless claims in the week to March 28, yet at 326,000 claims are still low and still point to robust jobs growth.
Equities were mixed in Europe not really taking too much from the European Central Bank’s rates decision overnight. The Dax was flat, the CaC up 0.4 per cent, while the FTSE100 fell 0.1 per cent. On Wall Street too there wasn’t much, and as I write stocks are generally only off smalls. The S&P500 for instance is off 0.1 per cent (1889), the Dow is only off 2 points or so, although the Nasdaq is suffering larger losses with a 0.95 per cent fall (4235).
Commodities had a mixed session -- crude pushed higher, with WTI up 0.8 per cent ($100.44), while Brent surged 1.51 per cent ($106.27) on growing scepticism that oil exports from Libya will resume. Gold then fell $3-$4 to $1287, and silver fell 1 per cent. Finally, copper was down 0.5 per cent.
Forex markets saw some whippy action on the euro following the ECB’s rates decision. The currency initially spiked, rising nearly 50 pips to just over 1.38. The offer came on as it became clear that the ECB’s statement was dovish (more below). In the end, the euro was down about 40 pips from yesterday afternoon at 1.3719. The British pound weakened too, about 40 pips to 1.6592. As for the Australian dollar, the unit is up smalls to 0.9229, while the yen is at 103.9.
Rates did little overnight; the 10-year Treasury yield slipped 1 bps to 2.78 per cent. The 5-year yield is at 1.78 per cent and the 2-year at 0.45 per cent. Aussie futures rose a tick each to 96.89 and 95.815 respectively.
Elsewhere, the US trade balance came in at a $US42.3 billion deficit in February from $39.3bn the month prior. Over in Europe, retail sales rose 0.4 per cent in February after a 1 per cent lift the month prior. On the policy side, the ECB kept rates unchanged and didn’t engage in quantitative easing as some policy makers (notably the International Monetary Fund), are calling for. The Bank said that it still had some scope to ease policy conventionally, implying that it could cut rates further before printing money.
In markets today, the SPI suggests Aussie stocks will be off smalls, effectively flat. Then in terms of the macro dataflow, there isn’t much for our region. So tonight, the key release is of course payrolls. The market looks for a 200,000 lift with unemployment expected to slip to 6.6 per cent. Other than that we see German factory orders -- and that’s largely it.
Have a great day…
Adam Carr is a leading market economist.
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