Scoreboard: Jobs drag

The local market looks set to come under pressure after Wall Street fell despite solid payrolls data.

Well the data was good, at least. US payrolls came in just a little bit weaker on Friday night at 192,000 instead of 200,000. This is still a strong result, a great result following a 197,000 lift the month prior -- and it adds to the case the US economy is rebounding following a weather induced lull. Some policy makers, like Christine Lagarde at the International Monetary Fund, are still trying to talk the numbers down as not good enough or not strong enough, but these comments are absurd and investors should ignore them. Otherwise, the unemployment rate was steady at 6.7 per cent.

Equities initially took that data as a positive sign. The S&P500 was up a few points at first, maybe 7 (just after the data), and in Europe all the major indices pushed higher -- between 0.7-0.8 per cent. In the US though stocks soon fell hard despite the positive data. The S&P500 for instance dropped 1.3 per cent (1865), the Dow lost 159 points (16,412) and the Nasdaq slumped 2.6 per cent (4127). It seems the slump was initially led by tech stocks -- especially some big name stocks like Google and Facebook -- but the offer soon spread across most sectors.

Forex markets took the Australian dollar higher, mainly through the European session, with the unit rising to a peak of 0.9310. It seems the Aussie dollar got caught up in a generalised emerging market rally and several currencies in that space pushed higher. As I write the currency is at 0.9290. Having said that there was little action elsewhere in Europe, with the euro and British pound both little changed at 1.3697 and 1.6576 respectively. The yen is at 103.3.

Rates saw some decent action, with US Treasuries rallying despite the strong jobs growth. It’s not that the bond market is concerned about the pace of jobs growth or anything, and while the numbers are very healthy, the result isn’t likely to encourage the Fed to tighten sooner. So yields on the 10-year note were down about 6 bps to 2.72 per cent, while the 5-year was down 10 bps to 1.67 per cent. Aussie futures rose 6 ticks each to 96.96 and 95.890 respectively.

Commodities then generally pushed higher. Crude was up 0.8 per cent on WTI to $101.06, while Brent was up 0.4 per cent ($106.7). In the metals space, gold spiked $18.8 to $1303, silver was up 0.7 per cent and copper fell 0.2 per cent.

Elsewhere, there wasn’t much. In Europe, German factory orders rose 0.56 per cent in February after a 0.1 per cent lift. The only other data of note was another UK house price index which showed prices falling 1.1 per cent in March after a 2.5 per cent gain the month prior. Annually, house prices are 8.7 per cent higher according to Halifax.

For markets this week, there are a few interesting data pieces for Australia. Firstly we get a confidence update with National Australia Bank’s business confidence figures coming out on Tuesday at 1130 AEST. Then we see Westpac’s consumer confidence figures on Wednesday (1030 AEST). New home lending data is also out on Wednesday at 1130 AEST, and then on Thursday all eyes will be watching the employment numbers. Following a strong spike in employment of 47,200 in February, the consensus forecast is that 5,000 jobs were created in March. The unemployment rate is forecast to rise to 6.1 per cent.

Globally, the key data includes Chinese trade statistics on Thursday at 1200 AEST and inflation numbers on Friday. Prior to that we see money supply and lending growth -- all important numbers with all the talk of a credit binge/bust etc. In the US, most of the key information flow is to do with the Fed. There are several speakers through the week -- James Bullard, Narayana Kocherlakota, Charles Plosser, Charles Evans and Daniel Tarullo -- and of course we see the FOMC minutes on Thursday. Other than that data is minor -- consumer credit on Monday and producer prices, construction output and Michigan’s consumer confidence index on Friday.

Have a great day…

Adam Carr is a leading market economist.

Follow @AdamCarrEcon on Twitter.