The major economic news overnight was that 191,000 jobs were created in the US in March. Well, that is according to the ADP report. This is another good signal that the recent lull in activity has passed and that momentum is building -- although it’s important to note that this report doesn’t necessarily have a great correlation with the more closely watched payrolls report, which we get Friday night.
Maybe it’s for that reason equity markets only saw a modest bid. At the very least, the solid gains of the previous two sessions have been held and even built upon, if only marginally. Helping also was a stronger-than-expected lift in US factory orders, which rose 1.6 per cent in February after a 1 per cent fall the month prior.
Rates sold off after the stronger data; the 10-year Treasury yield up 4 bps or so to 2.80 per cent. The 5-year yield is at 1.79 per cent and the 2-year at 0.46 per cent. Aussie futures were then flat on the 3s (96.92) and down 1 tick on the 10s (95.850).
Equities saw modest gains overnight, beginning in Europe where the major indices were up between 0.1 per cent and 0.2 per cent. US markets weren’t too dissimilar, and with about 30 minutes left to trade the S&P500 is up 0.3 per cent (1891). The Dow is 52 points higher at 16,585, while the Nasdaq is up 0.2 per cent (4276). By sector, basic materials and industrials were the key outperformers, while tech and utilities stocks weighed.
Commodities had a mixed session; crude was weaker, with WTI off 0.2 per cent ($99.59), while Brent was down 0.6 per cent ($104.68). Gold then rose $9 to $1289, and silver shot up 1.4 per cent. Finally, copper was up 0.2 per cent.
Forex markets saw the euro weaken a bit, maybe 45 pips or thereabouts to 1.3762. The British pound in turn was little changed at 1.6623, having hit a session high of 1.6663, while the Australian dollar was also little changed at 0.9243. The yen is at 103.86.
Elsewhere, British house prices rose 0.4 per cent in March according to Nationwide, to be 9.5 per cent higher annually. Over in Europe, producer prices fell 0.2 per cent to be 1.7 per cent lower annually. Then there were one or two items in the US worth mentioning as well. Firstly, the ISM for New York fell to 52 from 57; then the Atlanta Fed President Dennis Lockhart said that if weak growth persisted, he would back a change in the outlook for rates. On his current view, the Fed fund rate would start to rise in late 2015, but he said that may have to be pushed out if growth doesn’t lift.
In markets today, the SPI suggests Aussie stocks will be up 0.4 per cent. Then in terms of the macro data flow, retail sales at 1130 AEST will be the key data piece locally (alongside the monthly external trade numbers). Looking abroad, the Chinese non-manufacturing PMI comes out at 1200 AEST, while tonight we see eurozone retail sales and the European Central Bank rate decision. Many are calling for the ECB to either cut deposit rates or even start printing money, more obviously -- although for this meeting no changes are expected. Over in the US, we see jobless claims, the trade balance and the non-manufacturing ISM survey.
Have a great day…
Adam Carr is a leading market economist.
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