Equities rally on US jobs

US equities extended gains on the back of a monster jobs report which essentially reassured investors that the US economy is on track for a Q2 bounce.

NYSE
Source: Bloomberg

This saw the S&P close at an all-time high for the 25th time this year. The non-farm employment change reading for June showed a whopping 288,000 jobs added while the unemployment rate dropped to 6.1%. Both readings smashed expectations and this helped push the US dollar higher across the board. Additionally there were also upward revisions for April and May, confirming the strong momentum in jobs. However, wage pressure remained benign and this will be a minor concern.

We also had some activity in the eurozone with peripheral bonds rallying after the ECB somewhat indicated no limitations to how the banks use funds from the LTROs. The market was expecting these funds to be mainly directed at lifting household spending and supporting small businesses. However, Draghi didn’t reinforce this fact which seemed to make the market feel there weren’t restrictions.

Big moves for euro and yen against greenback

The overall impact of the activity on the euro and USD was a weaker EUR/USD as the pair pulled back to 1.3600. ECB President Mario Draghi also commented on the exchange rate and essentially said he’d be hoping stimulus would have the capacity to nullify the impact of the high exchange rate. Perhaps the biggest beneficiary of the US dollar move will be Japan today. The rally took USD/JPY back above 102 and the pair is currently trading around 102.20.

The Nikkei is pointing to a 0.7% rise at the open to 15,428 and this will see Japan lead the region. Data will be limited in today’s Asian session and this will be compounded by the fact the US has a bank holiday today.

Another positive start for the ASX 200

The ASX 200 is pointing to a 0.5% rise to 5518 which would see it trade at one month highs. As of yesterday’s close, the ASX 200 was already up 0.8% for the week. It’s been a good start to the financial year for local shares and it looks like we are on track to finish off the week with a bang. Cyclical names should be underpinned by the buoyant risk mood today and I suspect the materials could be leading the way yet again.

Iron ore surged nearly 2% to 96.50 and this will be supportive of the pure play recovery. Most of the other metals also posted gains and this is likely to remain a theme as long as global activity continues to pick up. The banks might be lifted by the developments out of the Eurozone regarding the LTROs. CBA will remain in focus after agreeing to review financial advice for nearly ten years.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts

Een artikel zoeken

Form has failed to submit. Please contact IG directly.

  • Ik wens per e-mail informatie van IG Group bedrijven te ontvangen over handelsideeën en IG's producten en diensten.

Voor meer informatie over hoe wij uw gegevens mogelijk kunnen gebruiken, bekijkt u ons Privacy- en toegangsbeleid en onze privacy website.