ETX Capital Daily Market Bite, 7th June, 2013: Stocks Feeling Uneasy Before US Payrolls Data
June 7, 2013 10:36 am
June 7th 2013, Daily Market Bite from Ishaq Siddiqi Market Strategist
A soft start for European share markets this morning ahead of the eagerly awaited monthly nonfarm payrolls report out later in the day. Traders this morning are clearly quite apprehensive about the upcoming jobs report, adjusting their risk profiles accordingly given the mixed data signals this week from the US labour market. Expectations are for around 169k jobs to be created by the US economy last month and the unemployment rate to remain at 7.5% but Wednesday’s shortfall in ADP data and Thursday’s in-line weekly jobless claims have left markets feeling highly uncertain about today’s outcome.
A reading above 169k will surely escalate expectations that the Federal Reserve will unwind asset purchases in coming months, while a number sharply below would suggest otherwise. Today’s figure for that reason will dominate headlines, influencing price-action until the Fed’s next policy meeting this month.
On Thursday, declines across European markets were sparked by the unwillingness of ECB chief Mario Draghi to refrain from using monetary tools to stimulate the economy. Wall Street rallied off lows toward the session close, providing support to European prices this morning. Germany’s central bank, the Bundesbank however has trimmed growth forecasts for 2013 and 2014, causing concerns about the outlook for Europe’s largest economy. Buba now expects German GDP to grow by 0.3% in 2013 from 0.4% estimated previously and expects 1.5% growth in 2014 from 1.9%. Markets barely reacted to the Buba’s downgrades however and are still digesting the overnight events in the Japanese market.
Japan’s Nikkei index fell sharply as the yen rose in overnight trade but had pared session losses to end slightly lower, down just 0.2% but still below the 13,000 mark it fell below in Thursday’s session. This week, the index has suffered three days of consecutive losses, putting it down around 19.2% from its May 23 intraday peak. The yen however broke through the Y96 level for the first time in two months and the currency is now up near 6.85% against the US dollar since May 22.
The Nikkei’s late recovery was spurred by reports that Japan’s government pension funds will increase their exposure to equities. Indeed, the country’s Government Pension Investment Fund [GPIF] which has around $1.1trillion worth of assets did just that. It raised allocations of domestic stocks to 12% from 11%, lifted foreign stocks to 12% from 9% and increased foreign bonds to 11% from 8%. Conversely, it cut domestic bonds to 60% from 67%. This adjustment in allocation clearly indicates that Japan’s policy makers are now starting to worry about the slide in the country’s stock market and consequent rise in the currency as scepticism grows over “Abenomics”.
June 7th 2013, Daily Market Bite from Ishaq Siddiqi Market Strategist
A soft start for European share markets this morning ahead of the eagerly awaited monthly nonfarm payrolls report out later in the day. Traders this morning are clearly quite apprehensive about the upcoming jobs report, adjusting their risk profiles accordingly given the mixed data signals this week from the US labour market. Expectations are for around 169k jobs to be created by the US economy last month and the unemployment rate to remain at 7.5% but Wednesday’s shortfall in ADP data and Thursday’s in-line weekly jobless claims have left markets feeling highly uncertain about today’s outcome.
A reading above 169k will surely escalate expectations that the Federal Reserve will unwind asset purchases in coming months, while a number sharply below would suggest otherwise. Today’s figure for that reason will dominate headlines, influencing price-action until the Fed’s next policy meeting this month.
On Thursday, declines across European markets were sparked by the unwillingness of ECB chief Mario Draghi to refrain from using monetary tools to stimulate the economy. Wall Street rallied off lows toward the session close, providing support to European prices this morning. Germany’s central bank, the Bundesbank however has trimmed growth forecasts for 2013 and 2014, causing concerns about the outlook for Europe’s largest economy. Buba now expects German GDP to grow by 0.3% in 2013 from 0.4% estimated previously and expects 1.5% growth in 2014 from 1.9%. Markets barely reacted to the Buba’s downgrades however and are still digesting the overnight events in the Japanese market.
Japan’s Nikkei index fell sharply as the yen rose in overnight trade but had pared session losses to end slightly lower, down just 0.2% but still below the 13,000 mark it fell below in Thursday’s session. This week, the index has suffered three days of consecutive losses, putting it down around 19.2% from its May 23 intraday peak. The yen however broke through the Y96 level for the first time in two months and the currency is now up near 6.85% against the US dollar since May 22.
The Nikkei’s late recovery was spurred by reports that Japan’s government pension funds will increase their exposure to equities. Indeed, the country’s Government Pension Investment Fund [GPIF] which has around $1.1trillion worth of assets did just that. It raised allocations of domestic stocks to 12% from 11%, lifted foreign stocks to 12% from 9% and increased foreign bonds to 11% from 8%. Conversely, it cut domestic bonds to 60% from 67%. This adjustment in allocation clearly indicates that Japan’s policy makers are now starting to worry about the slide in the country’s stock market and consequent rise in the currency as scepticism grows over “Abenomics”.
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