SCOREBOARD: Just the job

A batch of good global economic data saw stocks rally overnight and moves were decent. The bad news is that the Australian dollar pushed through $US1.04 (higher than before the RBA's rate cuts). It started in our session yesterday when China's PMI sneaked up over 50 for the first time in some months. Now rising from 49.8 to 50.2 isn't a massive difference or anything to be honest. But it did move in the right direction and signals expansion – so that's something. In any case, and by itself, it may not mean much, but it does form part of a generalised improvement in the global economic data. It's quite clear the global economy is reaccelerating now.

Now over in the US the dataflow was even better. The ISM survey showed a modest increase to 51.7 from 51.5 (51 expected), although again I don't want to overemphasise the increase. As far as I'm concerned it was flat. But that's an important event in itself – because it held its position over 50. This is critical as the index had slipped below 50, which signals deterioration in manufacturing. A bounce back over 50 might just be volatility, but as the second month in a row you can be a little more confident that it's not.

That's especially when it is accompanied by improving jobs statistics – new jobless claims fell to 363,000 in the week to October 27 (down 11,000), while the ADP employment report suggests 158,000 jobs were created in October. Both reports suggest we can expect continued strong jobs growth in the US. Remember that the correlation between ADP and payrolls (due Friday) isn't that great. Large moves are useful that's about all. The point is though, any indication payrolls might right rise 150,000 or so is good news, because no matter what anyone says, history proves that this is a strong jobs figure.

Recall that prior to the GFC – the boom years – average payrolls growth wasn't much over 100,000. Plenty of people, at the Fed included, appear to have forgotten this fact. Consumers, who are smarter than the FOMC, don't appear to have forgotten though and a stronger labour market is a key reason why consumer confidence is at a four year high. Now it has to be said that confidence (at an index of 72.2) still isn't normal given the average is around 90, but under the circumstances – with all the press, recovery deniers and constant pessimism, this is a good result. I wouldn't expect too much more at this stage and of course it will probably deteriorate post Sandy.

Markets reacted as you'd expect to all this data and the rally was decent from the open. Into the close the S&P is just over 1 per cent higher (1426), with the Dow up 117pts (13,214) while the Nasdaq is up 1.4 per cent (3019). US Treasuries then sold off a bit, the 10-year yield up to 1.72 per cent from 1.7 per cent, the 5-year and 2-year were little changed at 0.729 per cent and 0.29 per cent respectively.

Over in Europe the session was looking a little iffy a first and beset with indecision. A couple of hours into it a firm bid developed and stayed with the market throughout. US data providing another boost later in the session – (Dax closed 1 per cent higher with the CaC and FTSE just over 1.3 per cent higher).

There isn't too much news flow here – except that the Greek pantomime has come back to town and is really quite excruciating. Act II scene I – the IMF says talks with Greece have stalled – warning they face bankruptcy in two weeks. Wow. Recall that in Act I scene I, Greece said that agreement had been reached and signed off effectively – that was from the PM. In scene II, the German foreign minister said this wasn't true but that he was happy with progress, the Greek parliament even passed a bill making it easier to sell public assets. Stayed tuned I guess. Whatever the case, markets seem unfazed at this point – In particular (and this is all that really matters) Spanish and Italian bonds rallied and yields fell. The Spanish 10-year dropped about 5bp to 5.7 per cent, while the Italian 10-year fell 6bp to 4.85 per cent.

Elsewhere we saw commodities mixed with crude 0.8 per cent higher ($86.9), copper was 1 per cent higher while gold was off a few bucks $1715. Then, and as mentioned the Australian dollar sits 1.0403 which is about 40 pips higher than yesterday at 1630. Euro then weakened, falling 20 pips or so to 1.2941, while Sterling is at 1.6123 (little changed) and yen sits at 80.15.

Looking at the day ahead, the SPI suggests Aussie stocks will put on about 1 per cent (4479), although 3 and 10-year debt futures did little (down 2-3 ticks to 97.45 and 96.94 respectively). Otherwise we can expect producer prices today at 1130 AEDT but not much else. In terms of the dataflow abroad, it's all about payrolls tonight. 125,000 jobs are expected, while the unemployment rate is forecast to rise to 7.9 per cent from 7.8 per cent. Other than that, factory orders are out and then the Chinese non-manufacturing PMI is due on Saturday I believe.

That's about the lot, hope you have a great weekend…