World Week Ahead: World's biggest job market

Monday 29th March 2010

It’s time for the latest check on the strength of the US economic recovery - how many jobs are being created. That number will be released on Good Friday, when most markets are closed, but anticipation of the March US labour report will set the tone this shortened trading week.

The non-farm payrolls report is expected to show 190,000 jobs were created in March, according to Reuters. There was a 36,000 drop in jobs last month. The US unemployment rate is seen unchanged at 9.7%.

While the world’s biggest economy clearly is in better condition than a year ago, investors have been waiting for a new catalyst to push stock prices higher. The Dow Jones Industrial Average and the Standard & Poor’s 500 Index are now near 18-month highs - levels they’ve been steadily rising toward for more than a month.

“Investors are realising that the US expansion is quite solid,” David Kelly, who helps oversee $445 billion as chief market strategist for JPMorgan Funds in New York told Bloomberg News. “It will probably pick up pace rather than slow down from here. That’s the main thing behind this stock rally.”

On Friday, the Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’ dropped 3.4% to 17.77.

Stocks may soon have some competition though.

While bonds have proven a tough sell with governments around the world running record budget deficits, yields on US Treasuries last week are now approaching an attractive point. The 10-year note’s yield rose to 3.85% on Friday. The yield on the tow-year note reached 1.12% last week.

The Dollar Index, which measures the greenback against a basket of six major currencies, slid 0.68% to 81.61 on Friday.

The greenback is expected to extend its advance this week as concerns linger over Europe’s commitment to Greece.

The euro lost 0.9% against the US dollar last week after shedding 1.9% the previous week. So far this year, the euro has plunged 6.4% versus the greenback.

Not a few strategists have predicted the euro falling to $US1.30 despite the EU-IMF deal.

The yen fell against all 16 of its most-traded counterparts last week amid signs Japan’s central bank won’t be in a position to increase interest rates for some time.

Wednesday's US private-sector jobs data and Thursday's jobless claims could support investors betting on the economy’s recovery.

“Obviously, the jobs number is the most important thing,” Phil Orlando, chief equity market strategist at Federated Investors, in New York, told Reuters.

“You are going to get this delayed reaction (the following) Monday, unless the claims numbers are just so terrific, that you get some pre-buying ahead of Friday.”

As for Europe, the jury is still out on whether the euro-zone members have done enough to calm concerns about their willingness to help Greece and other members contain their budget deficits.

"Clearly, there is the potential for there to be fiscal issues with other countries in Europe, but the Europeans have now set a precedent that they intend to backstop any negative fiscal situations," Ken Farsalas, portfolio manager at Oberweis Asset Management in Lisle, Illinois, told Reuters.

For the week, the DJIA rose 1%, while the S&P500 gained 0.6% and the Nasdaq advanced 0.9%.

The Stoxx Europe 600 Index gained 1.3% to 263.58, a fourth straight weekly advance. The measure has gained 7.2% so far in March.

Beyond the jobs reports, other key US economic data due this week include two manufacturing reports, consumer confidence, a housing index, factory orders and construction spending.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, fell 0.2% to 267.332 on Friday.

Businesswire.co.nz

Comments from our readers

No comments yet