Markets pause ahead of non-farm payrolls

Thursday, July 03, 2014

US markets held firm midweek, ahead of non-farm payrolls and unemployment data due out later today. Both the S&P 500 and DJIA managed to find firm support around their opening levels yesterday as the release of significantly better than anticipated ADP employment change throughout June increased hopes for non-farm payrolls. ADP employment change added 281K positions throughout June, massively outstripping the 205K expected by market participants according to a Bloomberg survey. The bullish tones saw the dollar index extend gains yesterday, adding 0.2% as it moved higher off an eight week low. The dollar index this morning was trading towards 80.00 against its major peers.

Asian markets fluctuated between gains and losses overnight ahead of the US jobs data later today with trading activity largely subdued. Despite China’s services PMI reading for June continuing to gain pace, rising to 53.1 from 50.7 the previous month, benchmark indices in the region struggled to rally significantly higher. Regional indices were trading towards multi-year highs as healthy buying at the start of the week on increased risk appetite saw demand for equities improve. But in stark contrast to the positive start to the week markets were largely inactive as investors adopted a wait-and-see approach ahead of the data heavy European and US sessions today.

Spot gold prices pulled back off recent highs ahead of the data, trading below $1,320/oz at one stage early on in the session. With market participants expecting 215K jobs to be added to non-farm payrolls throughout June, any positive surprise could see increasing demand for risk assets and subsequently further price weakness for spot gold as investors pull out of the yellow metal in search of higher yield.

Plenty of macro action today will keep investors busy with the release of services PMI across the eurozone and UK as well as eurozone retail sales. Investors will be cautious ahead of the ECB rates decision and will be eagerly anticipating any further forward guidance from Draghi. The afternoon will be dominated by an onslaught of US macro releases, notably trade balance, NF payrolls, unemployment, jobless claims and ISM non-manufacturing data. With more than enough to keep investors occupied today we expect a busy session and early moves higher in the dollar ahead of the jobs data offer sign of the optimistic outlook shared by most market participants.

ADP employment change raises hopes for strong non-farm payrolls

ADP CHNG Index ADP National Emp 2014 07 03 07 59 05

DXY rebounds of eight week low on employment optimism

DXY Curncy DOLLAR INDEX SPOT 2014 07 03 07 59 25

China's services PMI recovers significantly in June

MPMICNSA Index HSBC China Servi 2014 07 03 08 06 33



Events for today

0200

CN

Jun

Non- Manufacturing PMI

0245

CN

Jun

HSBC Services PMI

0855

DE

Jun

Markit Services PMI

0900

EZ

Jun

Markit Services PMI

0930

UK

Jun

Markit Services PMI

1000

EZ

May

Retail Sales

1245

EZ

Jul

ECB Interest Rates

1330

US

May

Trade Bal

1330

US

Jun

NF Payrolls & Unemployment

1330

US

w/e

Jobless Claims

1500

US

Jun

ISM Non-Manufacturing

1530

US

w/e

EIA Nat Gas

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