Markets find solace from better looking indicators

15.26 AEST, Friday 5 October 2012

Markets find solace from better looking indicators
By Tim Waterer (Senior Trader, CMC Markets)

Financial markets have found solace from better economic indicators out of the US in recent days, however the upcoming US Payrolls result will be the defining moment of the week. With QE3 now on the table, we are not going to see a ‘bad means good’ scenario where a poor jobs figure results in equities going higher on speculation that more quantitative easing will be on the way. If the recent trading range of equity markets is to extend further north, the US jobs market will need to start showing some signs of life.

The Australian Dollar has plenty of ground to make up after its slump this week, however the currency did set about making the best of the ‘risk-on’ conditions today by following Asian equity markets higher. The Euro, Oil and Gold all have had solid sessions with the US Dollar dipping lower as part of the move into risk assets, and this has enabled the AUD to progress back past 1.0250.

If we see the US jobs report come in on the higher end of expectations (forecast is for around 115k jobs created) then this should provide some comfort to traders who will be more likely to shun defensive assets and take on board those with the potential for higher yield.

The Australian sharemarket hit the weekly finish line with some zest, thanks largely to a return to form by commodity prices which increased the value of our Materials sector. RIO in particular was a key contributor to the ASX200 performance, while elsewhere the large banking stocks also made solid headway. Just how far the Australian market can advance next week will be reliant on what influence the US jobs result has on global trading sentiment. Commodity price activity in the wake of the Non-farm Payrolls report will be a key factor for how our mining stocks perform in the early part of next week.

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