Bullish ADP numbers set the stage for non-farm payrolls

Thursday, April 03, 2014

US equity indices extended gains yesterday after the release of ADP jobs data which showed a 13K increase m/m to 191K new positions in March from February’s revised figure of 178K. The encouraging numbers increased optimism for Friday’s non-farm payrolls, further confirming that weather related disruptions were to blame for the sluggish performance at the start of the year.

Mixed performance for Asian equity markets overnight after Beijing pledged further action to help support slowing growth momentum and boost domestic demand. The news that the Chinese government will sell 150bn yuan of bonds this year in order to fund railway expansion and preferential tax rates to small businesses saw Japanese benchmark equity indices climbed higher while Chinese indices slipped lower on profit taking. Chinese equity investors had speculated that policymakers would increase stimulus efforts and had largely priced in the move but concerns regarding potential overheating of the real estate sector will keep investors on high alert.    

The dollar strengthened against the yen for the fifth consecutive session yesterday in the run up to Friday’s non-farm payrolls numbers as a combination of improving risk appetite and Chinese stimulus measures prompted investors to pull out of the yen in search of riskier assets. The yen has since traded as high as 104.07 against the dollar this morning as optimistic investors position themselves ahead of key data.

Three month LME aluminium prices extended gains yesterday, rallying for the fifth consecutive session as prices reached a year-to-date high on fundamental concerns. Prices traded as high as $1,830/tonne yesterday on supply concerns owing to a combination of power rationing in Brazil, Alcoa announcing cutbacks to smelting capacity at São Luis and Poços de Caldas, and Rusal hinting at output cuts after posting steep losses for 2013. Prices closed above the 200 day MA for the first time since March last year but have since hit technical resistance this morning, trading just below the previous days close.

Attention will be firmly fixed on today’s ECB meeting with market participants expecting interest rates to remain unchanged at 0.25% despite fears of deflation. Inflation in the currency bloc has fallen to its lowest level in over four years to 0.5% y/y and investors will be paying close attention to Draghi’s comments at the press conference. The euro slipped lower yesterday after testing resistance towards 1.3820 with levels this morning trading around 1.3670 ahead of the announcement.

Encouraging ADP employment change in March sets the stage for non-farm payrolls

ADP CHNG Index ADP National Emp 2014 04 03 07 22 53 

JPY weakens further against USD as risk appetite improves

JPY Curncy Japanese Yen Spot 2014 04 03 07 26 45

3-month LME aluminium prices rally on supply concerns

LMAHDS03 Comdty LME ALUMINUM 3 2014 04 03 07 32 46  



Events for today 

0855

DE

Mar

Markit Services PMI

0900

EZ

Mar

Markit Services PMI

0930

UK

Mar

Markit Services PMI

1230

US

Mar

Challenger Layoffs

1245

EZ

Apr

ECB Rate

1330

US

Feb

Trade Bal

1330

US

w/e

Jobless Claims

1500

US

Mar

ISM Non-Manufacturing

1530

US

w/e

EIA Nat Gas

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