News Column

MARKET COMMENT: US Stocks Set For Record Open After Strong Jobs Data

June 6, 2014

Jon Darby

LONDON (Alliance News) - US stock futures are pointing to a strong open on Wall Street Friday after the US non-farm payroll report came in broadly as expected.

The US economy added 217,000 jobs in May, just 1,000 less than the consensus expectation, while the April number was revised down slightly to 282,000, from its the very strong original print of 288,000.

Both the DJIA and the S&P 500 pushed up to fresh record highs on Thursday, closing at 16,836.11 and 1,940.46 respectively, in the wake of the raft of policy easing measures announced by the European Central Bank.

While the US markets has already been pointing to a marginally higher open Friday, the strong employment report has boosted futures markets further.

The DJIA and the S&P 500 now both look set to open 0.2% higher at fresh record highs, while the Nasdaq Composite is set to open 0.3% higher.

The headline rate of US unemployment remained stable at 6.3% over the month, beating economists' expectations for it to tick up to 6.4%, although since the Federal Reserve dropped its unemployment target as a single policy, the rate has lost a degree of importance.

"Following the Fed's decision to look at a broader range of data as part of their revised forward guidance, other aspects of the jobs report have become increasingly important, while the unemployment rate has become less so," said Alpari markets analyst Craig Erlam. "Participation has been a major talking point over the last couple of years, with many pointing to this as being part of the reason for the decline in unemployment."

The latest figures showed that the participation rate has fallen by 0.6% over the last year, although it was unchanged in the May alone, at 62.8%.

Gold continued to be volatile Friday, rising ahead of the US jobs data, before falling immediately after to a session low of USD1,250.21 per ounce. It then recovered back up to session highs at almost USD1,258.00 per ounce.

The currency markets also came alive on the release of the data, following a subdued morning. Both the pound and the euro have made session highs and lows against the dollar since the jobs report was released, but have returned to near flat. Ahead of the US market open, the pound trades at USD1.6812, and the euro trades at USD1.3655.

UK stocks are holding on to solid gains following the strong jobs report. Leading in to the US opening bell, the FTSE 100 is up 0.4% at 6,841.98, the FTSE 250 is up 0.9% at 16,145.17, and the AIM All-Share is up 0.5% at 804.34.

In Europe, the French CAC 40 is up 0.6% and the German DAX is up 0.3%.

Earlier Friday, the International Monetary Fund dropped its criticism of the UK government's spending cuts and economic recovery plans. The IMF had previously criticised chancellor George Osborne's spending cuts as being likely to jeopardise growth, but with the UK continuing to outshine most other economies on many measures, the fund's president Christine Lagarde conceded that the UK's "good macroeconomic performance is expected to persist".

The IMF warned, however, that the government needs to keep a close check on the housing market, saying that the increasing size of new mortgages "suggests that household are gradually becoming more vulnerable to income and interest rate shocks".

"The advice is coming from an institution that is no longer high up Chancellor Osborne’s Christmas card list after last year’s austerity spat," said Berenberg chief UK economist Rob Wood. "That should, however, not deflect from the importance of the message now."

There are no key data or corporate earnings left in the calendar Friday, with just the change in US consumer credit to come after the European market close at 2000 BST.

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Source: Alliance News

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