Shares advanced this morning for the first day this week as Asian markets rallied and gloomy employment news pointed towards future rate cuts.
At lunchtime the ASX 200 was up 21 points or 0.5% at 4165 after shaking off a mid-morning wobble after the 11.30am EST release of February jobs figures. The report showed the unemployment rate inched up 0.1% last month to 5.2% as the economy shed a net 15,000 jobs. Although the increased unemployment rate was expected, economists had predicted an increase of around 5,000 new positions.
"It suggests the chances of another rate cut are relatively good," Citi chief economist Paul Brennan told Fairfax.
Retail stocks lost ground this morning as institutional investors reacted to the deteriorating employment outlook. The consumer discretionary sector fell 0.5% and consumer staples lost 0.4%. The morning's rises were led by the energy sector, up 1.1%, financials +0.8% and industrials +0.8%.
Asian markets followed the solid overnight lead from the US and Europe as optimism grew ahead of tonight's Greek debt-swap deadline. Japan's Nikkei rallied 0.98%, Shanghai 0.44% and Hong Kong's Hang Seng 0.46%. Dow futures were recently down 10 points or 0.1%.
"With the [Greek] private sector involvement deal likely mostly out of the way, many will be waiting to move back into risk," a Societe Generale strategist told MarketWatch.
Crude oil futures retreated 13 cents this morning to US$106.09 a barrel. Spot gold was $1.50 weaker at US$1,683.90 an ounce. The dollar was buying US$1.0549.
The employment report appears to have been one of those "bad news = good news" affairs because interest rate cuts are good for stocks, even if a few more thousand workers were tossed on the scrapheap. The market is brutal in its calculations. Speaking of calculations, one of the central planks of my trading philosophy is to try to take big advantage of small mis-pricing opportunities. A perfect example this morning was FXJ, which dropped more than 6% to 71.5 cents when the employment report broke. That seemed a wild over-reaction, so I went in big. The result was a week's wage in a little over half an hour. BPT was also a golden opportunity close to $1.40 - still riding that one. Elsewhere, I took PBG too early and added the "swingable" APA in the hope/expectation it will stage one of its afternoon recoveries.
