Market wrap: The share market should open modestly higher this morning after an unexpectedly strong US jobs report helped Wall Street rebound on Friday.
The June SPI futures contract closed 8 points or 0.17% stronger on Saturday morning at 4751 as key Australian miners advanced in US trade, oil retreated and metals ended mixed.
US stocks rallied on Friday but trimmed gains after a report - quickly denied - that debt-laden Greece plans to abandon the European Union sparked a surge in the US dollar. A 170-point jump in the Dow faded to a 55-point or 0.43% gain. The blue-chips index lost 1.7% over the course of the week. The S&P 500 added 0.38% on Friday, its first gain all week, moderating a 1.7% weekly loss.
Market sentiment was boosted by the biggest increase in US jobs in nearly a year, which overshadowed an up-tick in the unemployment rate. Payrolls improved by 244,000 last month, surpassing the median estimate of economists of a rise of 185,000. The unemployment rate increased to 9%.
"The very positive jobs report was just what we needed after all the bad news of the last few days," the head of asset allocation for ING Investment Management in the US told Bloomberg. "The market is going to focus on the change in private payrolls which was excellent. That will more than offset a slight increase in the unemployment rate. If oil continues to fall, we'll see higher consumer spending and a very good environment for stocks."
Commodities came under pressure late in the session following news that European Union officials were holding an unofficial meeting to discuss Greece's debt problems. Greece's finance ministry later denied that there was any move to quit the European single currency. In the meantime the euro sank and the US dollar index jumped nearly 1%.
Oil closed lower for a fifth day in choppy trade after early buying interest faded. Light sweet crude for June delivery lost $2.62 or 2.6% at $98.06 a barrel, bringing the weekly loss to around 15%.
Gold staged a partial recovery at the end of a torrid week for commodities but silver extended its worst weekly loss since at least 1975 as trading margin increases continued to drive small speculators out of the market. Gold for June delivery added $10.20 or 0.7% to finish at US $1,491.60 an ounce on Friday but lost 4.2% for the week. Silver for July delivery lost another $2.63 or 1% at US $35.29 an ounce to close 27% lower for the week.
Industrial metals closed mixed but mostly lower as analysts started to speculate on the prospects for a recovery from short-term oversold conditions in commodity markets. In London, copper fell 0.4%, aluminium 0.9%, lead 0.1% and nickel 0.3%. Tin rallied 2% and zinc 0.9%. US copper fell 0.6%.
"The commodity selling frenzy may be short lived as investors regroup and look for value in many markets that had simply moved too far, too fast," the editor of Kerr Commodities Watch, told MarketWatch, singling out copper, oil and silver as examples.
TRADING THEMES THIS WEEK
TUESDAY BUDGET: This week's major local event is tomorrow night's Federal budget, which always delivers winners and losers in the business world. With the strength of the local currency lately undermining share market sentiment, the reaction on currency markets may determine how local shares perform this week. There should also be potential trades in sectors that benefit - or suffer - from government whim.
CHINA: The monthly economic update from the biggest buyer of Australian raw materials is due on Wednesday. The Shanghai Composite has been notably shaky lately amid speculation about further interest rate rises, contributing in part to recent weakness on our market.
COMMODITIES SELL-OFF: Commodity prices are a key driver for our mining-heavy share index. Last week delivered one of the most severe sell-offs on commodity markets in recent memory. There were some signs of stabilising on Friday and the question for traders is, is this the time to buy the likes of oil, copper, gold and silver miners or do they have further to fall? The US dollar index has opened weaker this morning, which may offer short-term support to dollar-denominated commodities.
ECONOMIC NEWS: A solid local schedule this week includes: monthly job ads at 11.30 am today; business confidence, trade balance, Federal budget (tomorrow); and employment change and unemployment rate (Thu). This week's key reports in the US include: the trade balance (Wed); weekly jobless claims, retail sales, producer price index, core PPI, inventories (Thu); and consumer price index, core CPI and consumer sentiment (Fri).
