Scoreboard: Muted reaction

Wall Street turned a blind eye to solid manufacturing and spending numbers as investors await key jobs data.

There was a solid run of data out last night, but the unfortunate thing is none of it seems to have much influence on the market.

Stocks are down in general, and that’s despite a decent lift in the well-respected ISM index to 54.9 from 53.7. This index gives a gauge of the manufacturing sector, but also the overall health of the US economy. That it expanded in April and came in stronger than expected is a bullish sign and it was particularly positive to see the employment index surge.

On top of that, both personal incomes and spending growth were strong (up 0.5 per cent and 0.9 per cent respectively) and better than expectations. Indeed spending growth is close to a five-year high!

Perhaps the sluggish price action had to do with the May Day holiday in Europe -- many markets were closed. Whatever the case, the price action in no way reflects the very positive signals that we are seeing in the economic data.

Equities were generally weaker on Wall Street, although the Nasdaq was modestly higher (0.3 per cent to 4127). The broader indexes fell however, and at the bell the S&P500 was down 0.01 per cent to 1883, while the Dow was 22 points lower at 16,558. 

Commodities were sold again generally, with the exception of copper which rose 0.2 per cent. Precious metals were weaker with gold off $11.8 to $1284, while silver was down 0.7 per cent. Crude was weaker again, WTI down 0.5 per cent to $99.3, while Brent is off 0.4 per cent to $107.68.

Forex markets saw the euro spike initially, up to $US1.3889 in the early evening. The unit spent the rest of the session on the offer though. As I write, it’s about 20 pips lower than at 4.30pm (AEST) -- $US1.3868. The British pound was then little changed at $US1.6891, as was the yen at 102.3. As for the Australian dollar, it sits a little lower (20 pips) at US0.9274c from 4.30pm (AEST).

Rates rallied again overnight, and the bidding action was comparatively solid. Price action was one-way and at the close the 10-year yield had fallen about 4 bps to 2.613 per cent. The 5-year yield dropped about 3 bps to 1.657 per cent, while the 2-year is at o 0.406 per cent. Aussie futures were up 2 ticks on the 3s to 97.090, while the 10s rose 3 ticks to 96.100.

Elsewhere, US construction rose by 0.2 per cent in March offsetting 0.2 per cent fall last month. Initial jobless claims then rose to 344,000 in the week to April 26 from 330,000. On the inflation front, the US personal consumption deflator rose by 0.2 per cent in March to be 1.1 per cent higher annually. Then over in the UK, Nationwide reports that house prices surged 1.2 per cent in April to be 10.9 per cent higher annually.

Markets may not be that exciting today in the lead-up to payrolls. The SPI suggests that Aussie stocks will rise 0.3 per cent and there isn’t a lot of data for our region. Domestically, all we see is the producer price index at 11.30am (AEST) and then this evening in Europe we get the final estimates of the European PMIs. Payroll figures, of course, are what everyone will be focusing on tonight -- the forecast is that 215,000 jobs were created which is very strong growth, coming after a 192,000 lift the month prior. Finally, the Chinese non-manufacturing PMI is due out on Saturday 11am (AEST).

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