US stocks eased from record highs on Friday, giving up earlier gains following the release of a soft nonfarm payrolls report for December. The ASX looks set to follow suit this morning, thanks in part to a surge in the Aussie dollar to end the week.
1. Equities in Europe and US pull back: Stocks in Europe and North America finished the trading week on a negative footing. A pan-European stock index, the Stoxx Europe 600 Index, shed just over 0. 1 per cent, while the benchmark S&P500 in the US dropped just shy of 0.3 per cent. In Wall Street trade, the losses were sustained primarily in the financial sector, after some soft US jobs data, and ahead of a week highlighted by earnings reports from some of the US’s largest financial institutions.
2. ASX set to fall this morning: The ASX200 is set up for a drop of 52 points this morning, according to SPI Futures, following Friday’s trade, which saw the index touch fresh all-time highs. The ASX200 added 0.8 per cent, surging through what had been a key technical resistance level at 6900, to close trade at 6929. It was a day’s trade characterised by comparatively high activity. Bank stocks were the outperformers, adding 18 points to the market, with only the materials sector losing ground for the session.
3. Local retail sales data smashed estimates: Australian Retail Sales data was the highlight of the local session on Friday. It greatly beat expectations, printing a 0.9 per cent month-over-month expansion in sales, versus the 0.4 per cent consensus forecast. Despite the strong result, market participants ultimately shrugged off the data, chalking-up the strong result to November’s Black Friday sales, rather than some fundamentally positive indication of consumer sentiment in the Australian economy. The odds of a rate cut from the RBA next month remains close to a fifty-fifty proposition.
4. US Non-Farms data disappoints: On the global stage, US Non-Farm Payrolls data highlighted Friday’s trade. That data disappointed slightly, showing that US jobs expanded a lower than expected 145k last month, versus a consensus estimate of 162k. The wage growth component of the data release was perhaps a silver lining for market participants, however. It showed hourly earnings grew at a modest 0.1 per cent last month, against the 0.3 per cent forecast, and reassured traders inflation risk remains low in the US economy.
5. Weak US data weighs on stocks, US Dollar: The soft US jobs numbers had the effect of weighing on risk appetite on Friday. It was generally responsible for the dip in US equities, and saw a marginal play into safe-haven government bonds. The US Dollar also suffered from the news, dipping roughly 0.25 per cent post-release, as traders increased expectations slightly for US Fed interest rate cuts at some point this year. That dynamic supported a brief jump in the AUD above 69 cents. Gold prices also gained 0.65 per cent.
6. US and Iran tension still a focus: A diminishing in US-Iran tensions has underpinned a drop-in market volatility. However, the issue remains a key concern for traders. Industrial metal prices edged higher in Friday’s trade, after the US announced fresh economic sanctions on Iran, that target Iranian metal exporters, in response to last week’s attacks by Iran on US military bases in Iraq. Market expectations for an escalation in conflict to remain quite low, however, with oil prices continuing to recede, following last week’s major price spike.
7. What to watch this week: The week ahead includes some major news worth watching. Top of the list will be the planned signing by the US and China of their “phase-one” trade-deal in Washington. US earnings slowly gets underway, with financial sector stocks highlighting the calendar. US-Iran tensions will stay in focus, especially after the weekend’s admission by Iran that it was responsible for the downing of Boeing passenger jet on its soil. And on the economic calendar, with a spate of US, European and Chinese data printed.
8. Markets wrap
ASX futures down 52 points, or 0.8 per cent, to 6817.
- AUD +0.6% to 69.01 US cents
- On Wall St: Dow -0.5% S&P 500 -0.3% Nasdaq -0.3%
- In New York: BHP +0.3% Rio +0.3% Atlassian -1.1%
- In Europe: Stoxx 50 -0.2% FTSE -0.1% CAC -0.1% DAX -0.1%
- Nikkei 225 futures -0.6%
- Spot gold +0.7% to $US1562.34 an ounce in New York
- Brent crude -0.6% to $US64.98 a barrel
- US oil -0.9% to $US59.04 a barrel
- Iron ore -0.5% to $US93.92 a tonne
- Dalian iron ore flat at 659.5 yuan
- LME aluminium +0.1% to $US1806 a tonne
- LME copper +0.3% to $US6198 a tonne
- 2-year yield: US 1.57% Australia 0.81%
- 5-year yield: US 1.63% Australia 0.87%
- 10-year yield: US 1.82% Australia 1.25% Germany -0.20%
- 10-year US/Australia yield gap: 57 basis points
This column was produced in commercial partnership between The Sydney Morning Herald, The Age and IG
Information is of a general nature only.
Source: Thanks smh.com