Weakening commodity markets and US jobs data set a nervous tone

The stock market looks set for a nervous opening this morning as the trading world waits on tonight’s US jobs data.

One of the short term issues for stock markets is that US markets are heading into this situation having risen 12% from the late September low. It’s clear that the October employment figure has the potential to be a go/no go data set for the Fed’s December rate decision. The fact that US equity markets have been strong leading into this decision, indicates that investors are not particularly concerned about the early gradual stages of monetary tightening unless we also see significant $US strength, or long bond market weakness emerges.

However, it’s likely that there could be short term volatility associated with market’s assessment of the Fed decision. Traders will be conscious of the downside risk created by gravity and the fact that the US market is heading into the key jobs data after such a strong rally.

Last night’s weak session on commodity markets is also likely to be a negative for the ASX 200 index today. While some stocks in the mining and energy sectors have been supported by the potential for merger and acquisition activity, this is not a factor for the big stocks which are likely to drift lower if commodity prices continue to weaken.