US Payrolls to set the table for market sentiment

2 November 2012

US Payrolls to set the table for market sentiment

By Tim Waterer (Senior Trader, CMC Markets)

With the upcoming US jobs report potentially having both financial market and electoral ramifications, the result may be a turning point for investments which may start to diverge from recent trading ranges depending on the result. Just which side of the 8% mark the jobs data comes in at may impact which party occupies the White House in 2013.

From the point of view of risk assets, after the good reading from the ADP data there does appear to be an expectation to the upside for the Non-Farm job creation figure. However the flip side to this is that a poor result could lead to another triple digit sell off on Wall Street which would again see the US Dollar back in favour. The US jobs report will likely set the table for market sentiment heading into the US election week.

Today the Australian Dollar gave up its 1.04 mantle in part due to the soft PPI reading which may have slightly nudged up the chance of an RBA rate cut next Tuesday. A fairly mundane showing on the local stockmarket also seems to have deprived the AUD of some of the overnight buying momentum. However, the currency did get quite a nice kick-along during the offshore session as the combination of the solid Chinese PMI and the upbeat US data served risk assets well. If we happened to see a US Non Farm Payroll result closer to the 150k mark and an unemployment rate below 8% again, demand for the safe haven Greenback would be sidelined and the AUD could have a look at 1.0435.

When breaking down the performance of the ASX200 today, you had the Materials stocks and then you had everyone else. The bellweather mining stocks like BHP and RIO both surged on the better global economic picture as painted by data from China and the US. However elsewhere today, the majority of the market seemed fatigued after the steep falls on Thursday or perhaps traders were just not inclined to take on positions ahead of the monthly US employment report. In any event, it was the second day in a row where the Australian market did not follow suit with other Asian bourses, with the ASX200 not able to muster a bounce after the Thursday sell-off.
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