The Dow and the S&P closed higher overnight, whilst an 8% fall in Telsa hit the Nasdaq. Asian markets were consolidating recent gains and Europe was pointing to a slower start after US – China trade talks produced a lot of headlines but little else. Trump has suggested that a deal is still around four weeks off, with some remaining issues yet to be resolved.
Given the run we have seen this week in riskier assets a pause for breath would hardly be out of the ordinary. This weeks' strong rally could be starting to show signs of fatigue.
NFP UP Next
The US jobs report is always a closely watched report. This time it will be even more closely scrutinized, after the report in February disappointed. February’s NFP report saw just 20,000 jobs created across the month. This was the lowest reading in 17 months and came after 4 months of notably strong employment growth.
There are several reasons to believe that we will see a solid number for March.
Firstly, historical data shows that the month following a weak NFP reading (fewer than 100k jobs created), growth rebounds strongly. Secondly, whilst the ADP (NASDAQ:ADP) private payroll number was well below expectations at 129k, the employment component of the ISM survey indicted the strongest growth in employment in 3 months. Investors will also be watching average earning growth, which hit 3.4% in February as wages grew at the fastest pace since April 2009.
A strong headline figure and solid wage growth will give investors a good distraction from economic slowdown fears. However, the fact is that the economy could be slowing, whilst the US labour market remains strong. This is because employment is a lagging indicator.
The US dollar is holding up well; this is mainly because it is the best of a bad bunch. Weak eurozone data and Brexit are weighing on the euro and the pound. Meanwhile improved geopolitical tensions are easing flows into the Japanese yen.
Declining flows into safe havens amid progress in trade talks, combined with impressive US jobless claims data resulted in a three week high for the USD/JPY at 111.79. A solid break through this level could see the pair attack 111.84 before targeting 112.00.
Opening calls
FTSE to open 8 points higher at 7409
DAX to open 13 points higher at 12001
CAC to open 9 points higher at 5472
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