Dyman Management & Associates Business Solutions

Your morning market update to welcome the last three weeks of 2013.

- US non-farm payrolls were stronger than the market expected, printing 203,000 with positive revisions to some previous month giving the impression that the US economy is really starting to get some economic momentum. But this didn’t seem to bother traders on the stock market, who took shares sharply higher even though jobs growth increases the chances of Dectaper at the FOMC meeting next week.

- At the close, the Dow had rallied 198 points or 1.25% to 16,020, the Nasdaq was 0.74% higher at 4,063 and the S&P 500 was up a stunning 20 points or 1.12% to 1,805. It is hard to fathom the positive reaction to strong data given fear of the Fed’s taper but if we draw a line through the US dollar’s moves (weaker against Aussie and Euro) as well, it seems traders are working on the premise that any taper is only going to be small, and rates are staying lower for longer. Equally though, the big jump in Consumer Credit and Consumer Sentiment might have contributed to a belief the economy might be able to support stock valuations on its own.

- In Europe, stocks were selling off just before NFP was released but the rally in US stocks dragged prices higher. The FTSE closed at 6,552 up 0.83% and the DAX was up 0.96% at 9,172. In Paris, the CAC rose 0.71% to 4,129, while in Milan the FTSE MIB rose 0.73% to 18,124. In Madrid, stocks were sharply higher than the low of the day but up just 0.09% on the previous close at 9,401.

- The SPI200 on the ASX has had a very strong bounce off last week’s low around 5260 and closed up 25 points on Friday’s close at 5209 bid.

- On global foreign exchange markets, the reaction seemed back-to-front, with euro rallying strongly to finish the week above 1.37. GBP lagged the move but still finished higher at 1.6344. Only USDJPY’s reaction of the big 3 made any sense and the dollar rallied to close at 102.88 looking biased back toward 104 in the next day or two.

- The Aussie dollar rallied also and has had a fairly good recovery off support under 90 cents we saw last week. Trading just above 91 cents, the Aussie looks biased back toward toward 92 cents this week. Data out of China over the weekend that showed a big surge in exports, which were up 12.7% year-on-year – much higher than expected. The ANZ reported yesterday that this was “due to better demand from developed economies, as indicated by improving US ISM and EU PMI. Shipment to the US and EU rose by 17.7% and 18.4% respectively, from 8.1% and 12.7% in the prior month.”. This should help Aussie dollar sentiment even though imports were only up 5.3% year on year – we already know that Port Hedland is running near record rates and last week’s data showed China’s share of Australian exports at an all-time high.

- On commodity markets, Nymex crude closed the week much stronger at $97.82 Bbl for a gain of 5.26% week-on-week. Gold remains under pressure at $1225 oz and it lost 2% last week, while Copper was at $3.26 lb. The Ags closed the week very quiet with Corn up 0.3% to 424 bushel, Wheat fell 0.12% to 637 and Soybeans were down 0.11% to 1326.

- Traders will also be wondering about Bitcoin this morning. Of course, for most traders this is a sideshow to their usual trading but the fact that the Chinese government banned the banks from using BTC and then the Chinese website Baidu said it wasn’t accepting BTC because it was too volatile saw the virtual currency crash below $600 on Friday night. It is now trading $735 this morning.

The full data calendar for the week can be found in our Trader Diary post and comes courtesy of Westpac.

On the day though, manufacturing sales are released in New Zealand, Japanese GDP, money supply and trade balance are out along with Chinese CPI (which will be important) before German trade data (Euro supportive?) and Italian Industrial data.

There is nothing material in the US tonight.