Global Markets Overview – 5/2/14

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By Evan Lucas, IG Markets Strategist | May 2, 2014 9:19 AM EST

Positioning before non-farm payrolls

With most of Europe and parts of Asia shut for May Day holidays, leads are coming from the US alone; and with China still observing Labour Day holidays, trade is likely to see positioning before the non-farm payrolls.

There is an interesting dichotomy at play in the US market at the moment around the USD; the euphoria of US data and the sweet-spot that the Fed has found itself in is not reflected in the USD. As expected, the Fed was very happy to continue with the current status quo.

The auto-pilot program of the unwinding of the asset purchase plan is firmly intact - a further US$10 billion was taken out of the program, leaving the purchase rate at $45 billion a month. Theory would suggest that this would be a USD strength situation, yet EUR/USD has found more support to $1.388. The argument is that the Fed funds rate is the driver here, but the expectations of an improving economy, the US equity market and the appeal of US bonds would counter this as well.

Moving to the economy, and disregarding the first quarter headline GDP print of 0.1%, the components inside the print combined with leading indicators the ADP, ISM PMI employment  components suggest tonight's non-farm payroll is going to be a positive one. It is also the highest consensus call on the non-farm payroll since mid-2010, yet again the USD can't find the support you would expect with this amount of positive sentiment.

This is likely to have two effects; if the print is positive it will be a catalyst for a bounce and a steady increase in the USD. If we get an inline result the market could put it down as one positive read out of the last four and continues with the current situation. Market positioning in the USD suggests the latter, so watch EUR/USD and USD/JPY.

Ahead of the Australian Open

We are currently calling the market higher by ten points to 5458 on the 10:00am bell (AEST). This could be the third day this week that the futures markets are looking for a positive day and the actuals reverse the leads.

With China shut and the market unable to gauge its reaction to the official PMI numbers, BHP, RIO and FMG are likely to suffer further down side as expectations of where the iron ore price is heading is likely to push them lower. Banks are also likely to suffer positioning after a solid number from ANZ was not enough to see it punch through record highs. With Westpac reporting on Monday, it is the one to watch this morning.

It is going to be a painfully slow trading day.

Asian markets opening call

Price at 8:00am AEDT

Change from the Offical market close

Percentage Change

Australia 200 cash (ASX 200)

5,458.30

10

0.18%

Japan 225 (Nikkei)

14,462.70

-22

-0.15%

Hong Kong HS 50 cash (Hang Seng)

22,147.30

14

0.06%

China H-shares cash

9,808.90

30

0.31%

Singapore Blue Chip cash (MSCI Singapore)

371.20

2

0.60%

US and Europe Market Calls

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

WALL STREET (cash) (Dow)

16,566.00

-8

-0.05%

US 500 (cash) (S&P)

1,884.83

2

0.09%

UK FTSE (cash)

6,815.00

23

0.34%

German DAX (cash)

9,625.40

9

0.09%

Futures Markets

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

Dow Jones Futures (June)

16,495.00

-11.00

-0.07%

S&P Futures (June)

1,879.00

1.38

0.07%

ASX SPI Futures (June)

5,448.00

14.50

0.27%

NKY 225 Futures  (June)

14,475.00

-20.00

-0.14%

Key inputs for the upcoming Australian trading session (Change are from 16:00 AEDT)

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

AUD/USD

$0.9270

-0.0025

-0.28%

USD/JPY

¥102.340

0.080

0.08%

Rio Tinto Plc (London)

£32.33

0.08

0.25%

BHP Billiton Plc (London)

£18.96

-0.24

-1.22%

BHP Billiton Ltd. ADR (US) (AUD)

$37.44

-0.06

-0.17%

Gold (spot)

$1,284.30

-5.44

-0.42%

Aluminium (London)

1785.75

-18.25

-1.01%

Copper (London)

6636.00

-7.00

-0.11%

Nickel (London)

18350.0

25.00

0.14%

Zinc (London)

2021.00

-21.25

-1.04%

Iron Ore (62%Fe)

Closed

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(Photo: Reuters / )
Asian markets gain ahead of US non-farm payrolls data.
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