IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Everyone was talking about the non-farm payrolls print almost as much as they were talking about the BoJ meeting last week, as unemployment numbers dominated FOMC discussions. The big argument in the Fed at the moment is ‘when and how’ to slow the asset purchase plan. Every single FOMC member has given their two cents on this issue, with unemployment being the number one issue on their lips.

The 88,000 jobs print on Friday was a big miss, but on a six-month average the numbers are slightly stronger than this outlier suggests at 186,000. The other take out of Friday’s numbers was that February’s print was upgraded to 268,000 jobs added, and the official unemployment rate dropped to 7.6% (now only 0.1% away from the Fed’s forecast of 7% to 7.5% for CY13).

This is all in-line with Fed expectations, however the fact that the pick-up in employment is below expectations, means FOMC members can push back their talk about winding up the $85 billion asset purchases from the June meeting to the December meeting.

Gold was a major beneficiary of this data, as the lower-than-expected jobs numbers saw a slight jump back into safe havens. Gold added $29 or 1.2% to be back at $1582, after touching a ten-month low last week of $1545. This may have put a floor on the gold price in the interim, and may hold off the impending bear market slide. Watch gold stocks to ride the backs of the gold bulls today as they snap up ‘cheap’ prices. Be careful here, as gold stocks do look like value traps.

Another issue facing the markets is the political turmoil on the Korean Peninsula, as it’s starting to get really testy now. Kim Jung-Un has not only exceeded his father’s rhetoric, he is actively and indiscriminately using terms such as ‘war’ and ‘reign of fire’ (a reference to chemical weapons); this is not going to make China or the US happy.

The ramp-up in rhetoric from the North, and the response of Japan, South Korea and the US is starting to influence markets. USD/KRW has now appreciated 2.4% over the last 15 days as the conflict escalates. This will continue to swirl in the background of regional markets with a definite flash point coming.

Data today is a little on the light side, however the much-watched ANZ job adds will be released at 12:30 (AEST). After snapping a ten-month decline in March, it will be interesting to get an insight into the jobs adds today ahead of the official unemployment rate and employment change on Thursday. Expectations are low for Thursday’s data release considering the extraordinary results in February that were seven times above expectations due to sample changes. Watch for a down-grade here and a decline in employment changes.

Looking at the open and based on Friday’s close in the US, the ASX looks like beginning the week dead flat at 4891. With S&P futures up ever so slightly, we may actually follow global leads from Friday and move lower, as commodities were mixed over the weekend with gold and silver up

The banks and the defensive stocks were sold off heavily on Friday; they should bounce back today after being hit a little too hard. Wednesday morning sees the start of Q1FY13 reporting in the US, with Alcoa starting it off, while here in Australia WOW reports its Q1 results on Thursday. Here’s hoping that some bottom-up results can kick start the market back on the northward path.

Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0374 -0.0045 -0.43%
ASX (cash) 4892 1 0.02%
US DOW (cash) 14562 -12 -0.09%
US S&P (cash) 1552.3 -2.5 -0.16%
UK FTSE (cash) 6272 -72 -1.14%
German DAX (cash) 7674 -144 -1.84%
Japan 225 (cash) 13224 390 3.03%
Rio Tinto Plc (London) 29.51 -0.64 -2.11%
BHP Billiton Plc (London) 18.79 -0.18 -0.94%
BHP Billiton Ltd. ADR (US) (AUD)# 32.24 0.0 0.00%
US Light Crude Oil (May) 92.92 -0.23 -0.25%
Gold (spot) 1582.80 30.8 1.99%
Aluminium (London) 1886 2 0.08%
Copper (London) 7407 -21 -0.29%
Nickel (London) 15950 -185 -1.14%
Zinc (London) 1884 -6 -0.32%
Iron Ore 135.90 0.0 0.00%
#Please note BHP’s ADR volumes are very light. Not an accurate measure.

IG Markets provides round-the-clock CFD trading on currencies, indices and commodities. The levels quoted in this email are the latest tradeable price for each market. The net change for each market is referenced from the corresponding tradeable level at yesterday’s close of the ASX. These levels are specifically tailored for the Australian trader and take into account the 24hr nature of global markets.

Please contact IG Markets if you require market commentary or the latest dealing price.

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