Stocks Rallied On Friday Night But Here's A Chart Investors Should Be Wary Of

Economic Data Is Weakening

Stocks in the US, and by extension on Australian Futures markets, surged on Friday night even though US employment was much weaker than expected.

January non-farm payrolls printed a rise of just 113,000 which was a huge miss on the 185,000 the market expected. Unemployment fell to 6.6% which was encouraging for the stock bulls.

Less encouraging, as our chart today shows, is the deterioration in the data flow from the G10, US and EU. The Citibank Economic Surprise index measures the dataflow (how it prints) relative to market expectations of the data.

At the end of 2013 and beginning of 2014 the data was printing very strongly relative to expectations (that is above the 0 line) but the positive surprises have been less strong.

If the data starts to universally print worse then expectations, as it had in Emerging Markets until recently, then traders may react badly.

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