Scoreboard: Work it out

Britain stole the show overnight with the jobs market posting the strongest growth on record, while the Australian dollar tiptoed higher.

Not the best of sessions for stocks overnight, although there wasn’t really much to drive the change in sentiment. Most of the press seem to cite the recent global growth downgrades by The World Bank, although that hardly seems likely. Don’t get me wrong, it wouldn’t have helped, but the forecasting track record of these types of institutions isn’t that good -- it’s not market moving stuff.

In any case, that’s not the most interesting aspect of last night -- for that we need to look to Britain. Here we find the jobs market is booming with 345,000 jobs created in the three months to April, which is the strongest growth since records began in 1971.

This follows the previous record set only last month of 283,000 jobs. Following the jobs surge, the unemployment rate dropped sharply to 6.6 per cent from 6.8 per cent, a five year low. The British pound was surprisingly mute on the result and the FTSE still fell.

Equities were weaker across the board, with European stocks in particular underperforming. The Dax fell 0.8 per cent, the CaC was down 0.9 per cent and the FTSE 100 fell 0.1 per cent. On Wall Street, falls were smaller with the S&P 500 down 0.4 per cent (1943), the Dow down 102 points (16843), while the Nasdaq fell 0.1 per cent. By sector, energy stocks were about the only group to get a boost -- everywhere there was a good spread of red. Industrials, utilities and financials were the key underperformers for the session.

Forex markets saw the euro little changed at $US1.3533 and the British pound, as mentioned, was relatively mute considering the data flow. The unit initially rose about 33 pips following the strongest employment growth since 1971. Otherwise the Australian dollar sits just below US94 cents, having hit a high for the session at $US0.9405. It soon fell back down to $US0.9380, but looks to have been bid back up to the US94 cent mark following the RBNZ rate decision.

Rates eased a little overnight, the US 10-year yield down a bit over a bp to 2.63 per cent. The 5-year was down about 2bp to 1.69 per cent, while the 2-year is at 0.431 per cent. Aussie futures rallied with 3s up 4 ticks to 97.155, while 10s were 3.5 ticks higher at 96.19.

Commodities generally pushed higher with the exception of copper which was down by about 0.5 per cent. Not that moves were large or anything. Gold was up $1 to $12560, silver rose 0.1 per cent and in the crude space, WTI was 0.1 per cent higher ($104.5), while Brent rose 0.5 per cent ($110).

Elsewhere, the geniuses at the IMF, who have been fanatical supporters of ultra-loose monetary policy, now suggest that -- wait for it -- another global crisis could ensue due to rapid house price growth. Other than that, the RBNZ met and hiked its cash rate to 3.25 per cent from 3 per cent. The central bank noted the economy had considerable momentum, that commodity prices were high, that house prices were high and that inflation was expected to increase. Finally, for the US, mortgage applicants rose 10.3 per cent in the week to June 6, while the federal budget came in at a deficit of $130bn for May, from $138bn. Year-to-date the deficit is around $436bn, down from $680bn at the same time last year.

Markets today. The SPI suggests Australian stocks will post a modest fall today -- 0.3 per cent. Otherwise the key data for Australia will be the employment figures at 11.30am (AEST). The consensus is that 10,000 jobs were created in May, with the unemployment rate forecast to rise to 5.9 per cent. Prior to that we see machine orders from Japan (0950), which largely sums up the data for our region. Tonight, the key data includes European industrial production, US retail sales, and of course the usual weekly jobless claims figures.

Have a great day.