The share market is primed for its best open in nine weeks after unexpectedly strong US jobs growth catapulted US and European markets higher on Friday.
The March SPI 200 futures contract closed 56 points or 1.3% ahead on Saturday morning at 4278 as the Dow recorded its highest finished since May 2008 and the Nasdaq hit an 11-year peak.
The S&P 500 extended its best start to a year in 25 years with its best session since January 3, rising 1.46% ion Friday after the jobless rate in the US fell to 8.3%, a three-year low. The Dow surged 157 points or 1.23% and the Nasdaq 1.61% to heights last seen as the dot.com boom unravelled in the early Noughties.
The rally followed the biggest monthly increase in job hiring in nine months in January. The US added 243,000 jobs last month, more than twice the consensus among economists surveyed by MarketWatch.
"Spectacular," the managing director of investment strategy for Wells Fargo Private Bank in the US told Bloomberg. "It's a very, very strong jobs number. It shows that companies have confidence that they see global demand growth through their products and services. That will support risk assets."
Other US data supported the emerging view that the US economy is riding out weak European demand. Factory orders increased for a second month and the services industry expanded more than expected last month.
European markets surged as the US jobs report bolstered earlier gains following news that private-sector activity increased in the euro-zone last month. A composite purchasing manager's index increased to 50.4 in January from 48.3 in December. Britain's FTSE jumped 1.81% on Friday, Germany's DAX 1.67% and France's CAC 1.52%.
Oil and industrial metals turned higher as investors chased assets most exposed to global economic growth. US crude improved for the first session in six, with light, sweet crude for March delivery rising $1.40 or 1.45% to US$97.76 a barrel.
Copper rallied to its highest level in a week as optimism over US demand partly offset concerns about inventory build-up in China. In London, copper added 3%, aluminium 2.8%, lead 2.9%, nickel 2.1%, tin 1% and zinc 2%. US copper put on 3.3%.
Gold fell for the first session in four as US jobs news reduced the prospects for further quantitative easing in the US. Gold for April delivery fell $30.80 or 1.75% to US$1,728.50 an ounce.
TRADING THEMES THIS WEEK
INTEREST RATES: Market analysts expect the stumbling domestic economy (and the share market) to get a leg-up from the Reserve Bank tomorrow with a cut in the cash rate by at least 0.25%. A few bullish commentators have even suggested that the central bank will cut by 0.5% to allow for the danger that the Big Four banks will not pass on any cut in full. The RBA decision is due at 2.30pm AEST tomorrow.
SPOTLIGHT SWINGS BACK TO EUROPE?: With the US earnings season starting to wind down and scheduled US economic reports light on the ground this week, there's a danger that international attention will switch back to Europe's debt woes. Let's hope not, but several key markets including the US have been nudging overbought territory for some time and Europe may provide an excuse for a pullback. Greece's fate hangs in the balance as the government battles not only to reach a deal with its private creditors but also to reach terms on a second bailout package. Talks with the IMF, ECB and European Commission are foundering over the coalition government's willingness/ability to introduce labour reforms and tighten its budget. The Greek Finance Minister said overnight that negotiations were on a "razor's edge". The government is due to meet with the IMF/ECB/EU troika again tonight.
ECONOMIC NEWS: A busy week for domestic news includes: the monthly inflation gauge at 10.30 am AEST and retail sales and job ads at 11.30 am (all today); construction index and cash rate decision and statement (tomorrow); consumer sentiment (Wed); and the Reserve Bank's quarterly monetary policy statement (Fri). Chinese inflation and trade balance data is due on Thursday and Friday. A light week for scheduled news in the US includes: testimony from Federal Reserve Chairman Ben Bernanke on the economic outlook (tomorrow); weekly jobless claims (Thu); and consumer sentiment and trade deficit (Fri).
