Positive start expected ahead of employment data

Positive start expected ahead of employment data

By Miguel Audencial (Sales Trader, CMC Markets)

The Australian share market is likely to have a positive start following another session of gains from its American counterpart overnight. However, investors may display caution and hold off any decision making prior to the release of Australian employment data at 11.30am.

The energy sector may outperform the market in the early part of the session with the help of a stronger crude oil price overnight. Exporters may also receive some support due to a weaker Australian dollar.

The European and American equity markets were buoyed by encouraging economic data from China and Germany. Investors displayed the willingness to take on more risk as China’s Trade Balance data surpassed market expectations by almost 3 billion dollars. German Industrial Production figures also exceeded forecasts gaining by 1.2 per cent. German Factory Orders reported encouraging figures of a 2.2 per cent gain compared to a forecast of a 0.4 percent decline. The risk on mentality was evident overnight as the higher beta materials and technology stocks in the US market outperformed. Commodity prices were also stronger.

The Reserve Bank of New Zealand appears to have joined in the royal rumble of the currency wars after the announcement that it intervened in the market to weaken its currency and is likely to do so again in the future. This caused the Kiwi to weaken against its major currency pairs.

Crude Oil posted notable gains overnight due to a lower than expected increase in inventories, a weaker US dollar, and encouraging economic data from China and Germany.

There is a possibility that we could see some volatility after the release of Australian employment figures later today if the result is far from the expected 11,500 gain. I expect that this is highly likely as analysts have been way off target in previous months. China will also release its CPI figures at the same time which could also add to the volatility.

There is also speculation that the RBA will cut rates again in June. If Australian employment figures are disappointing market talk about the likelihood of the rate cut will become louder.
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