The two key influences on the local market today are the strong US jobs figures and the lower oil price. The lower oil price will weigh on the energy sector. The strong US jobs data served to push up the US dollar and therefore push down the Aussie dollar below US83c. The stronger greenback will provide a boost to stocks with overseas operations. Overall the market should rise by around 0.5 per cent.
In US economic data, non-farm payrolls (employment) rose by 321,000 in November, well above forecasts of job gains of 230,000 and the strongest increase in jobs in almost three years. The jobless rate was unchanged at 5.8 per cent and hourly earnings rose by 0.4 per cent in the month, above forecasts for a 0.2 per cent gain. The trade deficit narrowed from a revised $US43.6 billion deficit to $US43.4bn deficit in October.
European shares rose on Friday with investors encouraged by the strength of the US economy. The FTSEurofirst 300 index was up by 1.8 per cent and the German Dax gained 2.4 per cent to record highs. In London trade, the FTSE rose by 1.0 per cent but shares in BHP Billiton fell by 1.7 per cent while Rio Tinto lost 1.2 per cent.
US sharemarkets rose on Friday with the Dow Jones and S&P 500 at record highs in response to better-than-expected employment data. Financials led the way, but weaker commodity prices weighed on metal and oil stocks. At the close of trade, the Dow Jones was up by almost 59 points or 0.3 per cent, the S&P 500 index rose by 0.2 per cent while the Nasdaq lifted 11.3 points or 0.2 per cent. For the week, the Dow rose by 0.7 per cent and the S&P rose by 0.4 per cent, but the Nasdaq fell by 0.2 per cent.
US treasuries fell sharply on Friday (yields higher) after strong jobs figures suggested rate hikes may occur sooner than previously expected. US 2-year yields rose by 10 points to 0.643 per cent while US 10-year yields rose by 7 points to 2.307 per cent. Over the week US 2-year yields rose by 14 points while US 10-year yields rose by 7 points.
Major currencies fell against the greenback in European and US trade on Friday with the US dollar index at the highest levels since March 2009. The euro eased from highs near $US1.2385 to around $US1.2275 and was at $US1.2285 in late US trade. The Australian dollar fell from highs near US83.80c to around US83.10c and was around US83.25c in late US trade. The Aussie is at US82.90c today. And the Japanese yen weakened from 120.00 yen per US dollar to ¥121.69 and was near ¥121.41 in late US trade.
World oil prices fell on Friday in response a stronger US dollar. A firmer greenback makes dollar-denominated commodities more expensive for buyers in Europe and Asia. Brent crude fell by US57c or 0.8 per cent to $US69.07 a barrel. US Nymex crude price fell by US97c or 1.5 per cent to $US65.84 a barrel. Over the week Brent crude fell by $US1.08 or 1.5 per cent while Nymex eased by US31c or 0.5 per cent.
Base metal prices fell by up to 1.9 per cent on the London Metal Exchange on Friday, with nickel leading the declines while lead and zinc fell only 0.1 per cent. But over the week nickel rose by 3.1 per cent while aluminium lost 2.6 per cent and tin fell 0.4 per cent. Gold fell on Friday in response to a stronger greenback with Comex gold futures down by $US17.30 an ounce or 1.4 per cent to $US1,190.40 per ounce. Over the week gold rose by $US15.20 or 1.3 per cent. Iron ore fell by US20c to $US70.90 a tonne on Friday and was up $US1.10 over the week.
Ahead: In Australia no major economic data is scheduled. In China, trade data is issued. In the US, the employment trends report is released.
Craig James is chief economist at CommSec.