– US non-farm payrolls disappointed the market with the the 209,000 rise in July undershooting expectations. But the 15,000 upward revisions to the two previous months gave a 277,000 pace of growth in Q2 2014 from 189,000 in Q1 – that’s solid.
– Indeed even though the 209,000 was well down on the 298,000 in June and below the 233,000 expected, every sector showed positive gains. Solid.
– The reaction of markets was – for the third day in a row – kind of weird. US bonds rallied hard, the US dollar lost quite a bit of ground and stocks finished in the red but off their lows.
– At the close the Dow was down 70 points or 0.42% at 16,493 but 60 points off the low. The Nasdaq fell 0.38% to 4,353 and the S&P 500 fell 6 points to 1,1925 for a loss of 0.29%. At one stage however the S&P was a further 9 points lower at 1,916 before recovering.
– In Europe weaker than expected Markit Manufacturing PMI’s, particularly Germany which printed 52.4 versus 52.9 expected, knocked stocks which fell heavily. The FTSE was down 0.76% at 6,679, the DAX fell 2.10% to 9,210 and the CAC dropped 1.02%. Stocks in Milan fell by 1.02% also while in Madrid stocks were 1.80% lower.
– The impact of the moves in the US has knocked local futures trade with the SPI 200 September contract down 26 points to 5,472. This on top of the 1.4% loss on the physical on Friday is not a good sign for a week packed with local data.
– Asian stocks were lower Friday and are likely to be pressured again today. The Nikkei closed off 0.63% to 15,523, the Hang Seng lost 0.91% to 24,532 and the Shanghai exchange lost 0.75%. Data is quiet in Asia today.
– On the bond market there was a rally in US 10 year treasuries of around 10 basis points to 2.49%. Ostensibly this was because of a lack of wage price pressure shown in the labour market but equally there could be an allocation shift happening out of high yield corporate bonds and into the safety of treasuries. Supporting this hypothesis, Italian bonds were 7 points higher on the night.
– In FX markets the weaker than expected non-farms combined with a technical outlook suggesting a bounce in the Euro and Aussie dollar to drive the US dollar lower. Euro had a strong bounce and sits at 1.3424 this morning, the Aussie is back above 93 cents at 0.9307 and traders will be eyeing retail sales today at 11.30am (even though it’s a bank holiday). Sterling couldn’t raise its head and is sitting at 1.6825 while the USDJPY is back at 102.51.
– On commodity markets September iron ore fell $1 to $94.50 tonne while Newcastle Coal for the same delivery rose 30 cents to $69.30 tonne.
– Nymex August crude continued to tank falling to $97.62 Bbl, gold is bouncing up and down at $1,293 while silver is at $20.30 oz. Copper closed at $3.21 lb while the ags were mixed with corn down 1.26%, soybeans off 0.78% while wheat rose 0.75%.
On the data front today retail sales in Australia will be the local focus but the TD inflation number and ANZ job ads are very important in giving a picture of where the economy is at present. PPI in Europe will be interesting in the run up to this week’s ECB meeting and in the US the ISM New York index is out.
And now from CMC Markets’ Ric Spooner with today’s Stock of the Day
If you are an iron ore and China bull, Atlas iron is a stock with plenty of leverage to prospects in this area. In the June quarter its cash cost of production for iron ore was about $70 per tonne. Shareholders need a higher iron ore price. Atlas is also involved in high stakes negotiations to obtain rail access to Port Hedland and, for good measure, features regularly in press discussion as a possible acquisition target for Chinese companies
All this makes a potential double bottom pattern in the Atlas chart worth keeping an eye on. The pattern would not be triggered unless there is a break above resistance at 69.5c.
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