Scoreboard: No payroll pain

Global equity markets largely ignored the weaker-than-expected US payrolls result on Friday with solid gains on both sides of the Atlantic. Wall Street outperformed with the S&P500 up 1.3 per cent (1797), the Dow rose 165pts (15794) and the Nasdaq was 1.7 per cent higher (4125).

Over in Europe, gains were generally pretty good, although the FTSE100 underperformed with a 0.2 per cent gain. Otherwise the Dax rose 0.5 per cent and the CaC was up almost 1 per cent. Despite the disappointing jobs report, it wasn’t a case of the market getting ahead of itself; the jobs report wasn’t as bad as it looked. For a start, weather has had an impact on the result. That, of course, is temporary. Secondly, upward revisions to the last two months saw an additional 70,000 jobs created. More importantly, revisions to back data mean that there are over 500,000 more employed reported now than last month.  The unemployment rate fell another 0.1 per cent to 6.6 per cent and that’s with a 0.2 per cent lift in participation to 63 per cent. It’s probably also important to note that US consumer credit surged another $18 billion in December, which is very strong growth.

Rates saw some whippy action around the payroll figure, with the US 10-year note trading 8 basis points in yield around the figure, although in the end, yields were little changed. The 10-year is at 2.68 per cent, the 5-year at 1.47 per cent and the 2-year at 0.30 per cent.

Forex moves were generally contained. The Australian dollar hovered around 0.8947, little changed from Friday afternoon. There was only a little more action for euro, up 30 pips or so at 1.3616. The British pound was the key outperformer for the majors, up about 80 pips or so to 1.6401. The catalyst here is positive economic data, including a GDP estimate that suggests the UK economy continued to post strong growth rates in January. Finally, the yen was at 102.52.

Commodities saw a modest bid in the metals space, with gold up nearly $6 to $1262. Silver was flat and copper was only slightly more bid - 0.2 per cent. Otherwise for crude, Brent was up 0.3 per cent ($106.2), while WTI was up 2.1 per cent to $99.88. Brent was also 2 per cent higher (109.5), with both getting a boost on concerns over global oil supplies.

Elsewhere we saw German trade data, where exports fell 0.9 per cent and imports were 0.6 per cent lower. Industrial production also fell by about 0.6 per cent in December, but this followed a surge of over 2 per cent the month prior. As for the UK, industrial production rose 0.4 per cent.  

In markets this week, Aussie data kicks off on Tuesday, with home loans data at 1130. We will also see the ABS house price series and NAB's business survey for January. On Wednesday we get another estimate of consumer confidence, while Thursday sees the domestic employment report. The consensus expectation is that 15,000 jobs were created in January, with the unemployment rate forecast to rise to 5.9 per cent from 5.8 per cent. Other than that, we have a number of corporate earnings reports – Commonwealth Bank on Wednesday – and two Reserve Bank speakers as well on Thursday and Friday.

Globally, it’s worth watching Chinese trade data on Wednesday, while key US retail sales data comes out Thursday night. Friday night sees US industrial production and the University of Michigan’s preliminary estimate of consumer confidence for February. Otherwise for the week, there will be a spread of Fed speakers and the usual weekly jobless claims numbers.

Adam Carr is a leading market economist.

Follow @AdamCarrEcon on Twitter.