– BOOM. 321,000 is a stonkingly huge print for non-farm payrolls in November and the US dollar didn’t miss the import of what it means for Fed policy, crushing all other currencies on Friday night. The Aussie is below 83 cents this morning, USDJPY is up at 121.41 and the Euro is below 1.23. These are big macro moves which represent a recognition that at next week’s FOMC meeting there is a real chance that the “considerable period” language around interest rate stability in the US could give way some more specific guidance about when the Fed will raise rates in 2015.
– The fact that non-farms have been positive for 50 straight months is, in and of itself remarkable in the context of the GFC, but as Bill McBride from Calculated Risk wrote over the weekend the outlook for the US economy is getting brighter, which means the Aussie will print in the 70s in 2015 – our own good news.
– So US stock markets were all in the green, but far less ebullient than either Europe or Asia.
- Dow Jones up up 0.33% to 17,959 after making a high of 17,991.
- Nasdaq up 0.24% to 4,781.
- S&P 500 up 3 points to 2,075 for a gain of 0.15% and four points below the new all time high of 2,079.
– European Markets were all higher on Friday excited about the strength of the US data and growing expectations that Mario Draghi will one day, finally, hopefully almost in spite of himself, deliver real and meaningful QE to Europe. Maybe.
Anyway, at the close.
- London(FTSE 100) up 0.95% to 6,743.
- Frankfurt (DAX) 10,000! Up 236 points or 2.39% to 10,087.
- Paris (CAC) up 2.2% to 4,419.
- Milan (FTSEMIB) 663 points, 3.41% to thre good an above 20,000 once again at 20,087
- Madrid (IBEX) up 2.65% to 10,901
– Locally the impact was that on ASX futures trade the Dec SPI 200 rose 27 points to 5,360. This implies a better day for the local market today but the huge range on the futures on Friday suggests that traders are still not exactly clear that Australian stocks can rally sustainably.
– On Asian stocks Friday, the Shanghai had a very volatile day making a high of 2,978 before closing at 2,938. The speed of the rally has everyone a little worried about sustainability and Chinese authorities have even given a warning to investors. But it should be a ripper day in the region today given Asia feeds the beast that is the US economy with goods.
And at the close:
- Tokyo (Nikkei Average) up 0.18% to 17,920
- Hong Kong (Hang Seng Index) up 0.72% to 24,003
- Shanghai (Shanghai Composite Index)up 1.33% to 2,938.
– Rates were fairly quiet at the 10s, but the short end of the US curve is going to get a wriggle on, most likely in the next week, which will continue to underpin the US dollars strengh on a relative rate and economic health basis.
– On currencies this morning, the Aussie is below 83 at 0.8292, Euro is at 1.2285, the Yen at 121.41 and GBP at 1.5583. Market positioning is short and seriously short by recent historical standards all of these currencies as bets remain large that the US dollar will continue to strengthen.
– Commodity markets saw Nymex crude finish at $65.63, gold fell to $1,189 and copper was largely unchanged at $2.909. On the Ags, corn was 1.6% higher, soybeans rose 2.68% and wheat was 0.64% higher. On Australia’s bulks, March iron ore dipped 21 cents a tonne to $69.83, while coal for the same month fell 25 cents to $62.50.
On the data front there are some holidays in Europe, while we get ANZ job ads in Australia and Chinese trade data which will be important. Otherwise it’s fairly quiet economically.
And here’s Ric Spooner from CMC Markets with the Stock to Watch
It hasn’t been a great fortnight for Origin shareholders, the stock lost 15% of its value over that time as markets factored in the prospect of lower oil prices.
Friday saw a couple of developments for Origin. One is that S&P left its credit rating unchanged at BBB. CEO Grant King was quoted as saying that Origin’s APLNG coal seam gas project in Queensland would remain profitable even at sharply lower oil prices. It may be a bit too early to start thinking this way but one thing to keep in mind about oil and gas investments is that they generally have a 20-40 year life span. This makes it almost inevitable that there will be several cycles of both low and high prices over their lifespan. As long as the project’s cost base is low enough and its owners balance sheet is good enough to withstand the periods of poor prices, return on assets is about average revenue over the life of the project.
For technical traders, the other piece of news is that Origins’ share price hit the 78.6% retracement level .This means it may be worth pausing to see what happens here. If this level is respected for a while and last week’s gap between $11.60/$11.68 is filled, the share price might get at least a corrective rally.
Ric’s on Twitter: @ricspooner_CMC