Morning traders.Market wrap: Shares are likely to claw back...

Morning traders.

Market wrap:

Shares are likely to claw back Friday's losses after solid jobs data helped US stocks push to a five-year high.

The March SPI 200 futures contract rallied 18 points or 0.4% to 4723 on Saturday morning as the S&P 500 reached a level last seen in December 2007.

Resource stocks and financials led the gains as the US's benchmark index advanced 0.45%. The Dow put on 44 points or 0.33% and the Nasdaq added just 0.05% as technology shares declined.

Traders were relieved by a "Goldilocks" December employment report that wasn't weak enough to set alarm bells ringing over the pace of the economic recovery, nor strong enough to encourage the Federal Reserve to curtail its bond-buying stimulus program. Non-farm payrolls increased by 155,000 in December, broadly in line with expectations, following an upwardly-revised rise of 161,000 in November. Unemployment was steady at 7.8%.

"It was not too hot, not too cold and just right," the chief market strategist at ING US Investment Management told Bloomberg. "In light of the uncertainty in December with the fiscal cliff, concern over earnings and other negative market events, the report is a positive surprise and shows employers are still hiring."

Services activity also increased. The Institute for Supply Management's services index advanced to 56.1% last month from 54.7% in November.

Improving risk appetite was signalled by strength in cyclical stocks and small caps, and a plunge in the VIX. The Dow Jones Transportation Average rallied 1.2%, the Morgan Stanley Cyclical Index 1% and the Russell 2000 index of small caps 0.75%. The VIX, Wall Street's "fear gauge", slid another 5% for a weekly decline of 39% - its sharpest weekly retreat of all time.

Major European markets inched higher after economic data suggested the euro-zone is emerging from its double-dip recession. The Markit euro-zone composite output index hit a nine-month high in December as Germany returned to expansion. Germany's DAX rallied 0.25%, France's CAC 0.24% and Britain's FTSE 0.71%.

A Christmas draw-down on US oil inventories helped crude overcome early weakness. West Texas crude for February delivery advanced 27 cents or 0.3% to US$93.19 a barrel after falling as low as US$91.52.

Industrial metals continued to give back some of their post-US budget deal gains. US copper for March delivery retreated two cents or 0.4% to US$3.70 a pound. In London, copper fell 0.7%, aluminium 2.4%, nickel 0.7%, tin 0.9% and zinc 2%. Lead gained 0.2%.





TRADING THEMES THIS WEEK

VOLUME STARTS TO RETURN: Trading volumes should start to pick up this week as institutional traders crawl back to their desks from holiday. Volumes tend to build steadily during January, so the worst of the festive doldrums is behind us. We should see increased opportunity among the blue chips/mid-caps and a broadening of activity away from the speculative end of the market. Speculative interest always blows hot and cold and right now is enjoying one of its periodic bursts of enthusiasm, with the likes of RXL, DRK and ZYL providing plenty of interest.

US EARNINGS: With US budget concerns temporarily quelled and Europe working through its problems, the spotlight may return to corporate performance with the launch of a new new quarterly earnings season in the US this week. Alcoa's report tomorrow night marks the unofficial launch of the Q4 season, which is likely to be marred by the stultifying effects of the fiscal cliff debate. Analysts have been slashing their profit predictions on banks, miners and tech stocks to take account of the effects of the budget wrangles. That may leave room for upside surprises in the weeks ahead. Read more here.

CHINESE RECOVERY: With the US economic calendar looking extremely light this week, signs of recovery in China may attract more attention than usual. Trade balance, new loan and money supply figures are due on Wednesday, followed by consumer and producer inflation data on Friday.

ECONOMIC NEWS: This week's Australian highlights are: trace balance, construction index (tomorrow); retail sales (Wed); and building approvals (Thu). The highlights of an unusually light US calendar are: weekly jobless claims (Thu); and trade deficit and import price index (Fri).

Good luck to all.