Equity markets continued to cheer the bad news on Friday as weak jobs report increased the likelihood that the U.S. Fed will no longer pull the trigger on hiking rates in the near future. The Dow jones Industrial Average rallied more than 300 points, S&P up 35 points, and Nasdaq composite erased 2015 loses. Japans Nikkei is up 1.44% extending its rebound from an eight-month low tested on 29 Sep as markets anticipate that Bank of Japan would possibly announce a fresh round of monetary stimulus on Wednesday.
As widely expected the Reserve Bank of Australia didn’t announce any new, leaving its benchmark interest rate at 2% and sticking to its language on the currency. Although weakness in China continues to be the main threat for Australia’s Economy, latest round of economic data gave officials some relief as unemployment fell to 6.2% in August and retail sales rebounded 0.4% following a shock decline in July. The Aussie managed to rally 50 pips against the US Dollar to 0.7130. A rise above 0.7170 would break the downtrend since mid-May, providing further potential gains in the near term to test September high of 0.7280, but with the interbank market pricing in a 60% chance of a 25 basis point cut in December selling the rallies would be a better strategy for trading the currency pair.
Although India was the brightest spot among the BRIC economies, consumers are turning pessimistic according to MNI India Consumer Sentiment Indicator, which fell to 3 years low. Though the reserve bank of India cut interest rates by 75 basis points since the beginning of 2015, consumers are not turning optimistic. The report showed respondents were least optimistic on household finances. The Nifty fell from its 8180 highs but still trading 0.2% higher. The Indian Rupee lost momentum against the US Dollar after a five consecutive days of rally, and it could be a question on whether the Indian currency is done with its rally from September lows.
In commodity markets, it is worth keeping an eye on Oil as Brent approaches the upper end of a month trading range of $50. Yesterday’s 2.3% rally was led by Russia’s willingness to meet other major oil producers. However looking at the fundamentals, nothing has really changed; the supply glut is still there, Saudi selling oil at a discount, and though U.S. oil rigs declined heavily last week, inventories continued to build. A break above $50 could lead for further strength and possibly testing 31 Aug high at $54.3, but with no fundamental support, any rally could create a selling opportunity.