Investors hesitant ahead of US employment data

Friday, December 05, 2014

Asian markets traded with modest gains during overnight trading despite both European and US equity benchmark indices posting losses yesterday as investors repositioned themselves ahead of today’s important data releases. Japanese equity indices gained much of their support from a weaker yen, which traded above 120.00 against the dollar for the first time since July 2007, reaching 120.25 before pulling back below 119.80 yesterday while activity early this morning has seen the yen weaken back above 120 ahead of the European session. US benchmarks pared recent gains after initial weekly jobless claims came in at 297K which was only 2,000 above consensus expectations according to a Bloomberg poll but saw initial claims fall 17,000 w/w. Investors will be paying close attention to the release of today’s non-farm payrolls numbers with market participants polled by Bloomberg expecting 230K positions to be added in November in comparison to the 214K positions added last month.

The dollar index rallied higher ahead of today’s crucial data releases as it touched a fresh year-to-date high towards 89.122 against a basket of major peers yesterday as it looks to target a seventh week of gains. However, traders continue to exercise caution and reduced holdings in the greenback, sending the index to a low of 88.212 before recovering some of these losses towards the close, eventually ending the session down 0.3%. Activity this morning has seen the dollar index open slightly lower than yesterday’s close before trading back up towards 88.784 ahead of today’s employment data. In addition to non-farm payrolls investors will be eagerly anticipating the US unemployment rate for November with the expectations that it will remain unchanged month-on-month at 5.8%. We have been surprised in the past however; as the rate of unemployment rate in recent months has come in below expectations and having dropped from 6.7% at the start of the year any further improvement in the labour market could see additional appetite for risk on renewed investor optimism.

Three month LME nickel prices posted gains for a fourth straight session yesterday, adding 3.35% throughout the session and bringing gains for the week to just under 6.5% after built on support at the 50 day MA on Monday. Buying activity remained constant throughout the entire session with the bulls firmly in control as prices ended the session at $17,120/tonne, reaching a ten week high ahead of US employment data. Official LME warehouse inventories also showed early signs destocking, falling back to 407K tonnes yesterday after rising steadily throughout the second half of the year, adding 13.5% over the past two months alone. Investors will be paying close attention to stock levels after today’s data release and with Indonesia upholding the ban on unrefined ore exports we could potentially see some tightness return to the market, prompting a further rally in prices.

JPY trades above 120.00 against the dollar

JPY Curncy Japanese Yen Spot 2014 12 05 07 28 07

US initial weekly jobless claims drop back below 300K

INJCJC Index US Initial Jobless 2014 12 05 07 29 49

DXY consolidates ahead of non-farm payrolls

DXY Curncy DOLLAR INDEX SPOT 2014 12 05 07 33 20

3-M LME nickel futures rally ahead of US data

LMNIDS03 Comdty LME NICKEL 3 2014 12 05 07 49 16

Events for today

0500

JP

Oct

Leading Index

0700

DE

Oct

Factory orders

0930

UK

Nov

BoE/ GfK inflation report

1330

US

Oct

Trade Bal

1330

US

Nov

NF Payrolls & Unemployment

1500

US

Oct

Factory Orders

2000

US

Oct

Consumer Credit

All times UK Local Time

 

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