Originally published by Rivkin Securities
US initial jobless claims declined to 234,000 for the week ending April 1st against estimates for 250,000. The reading has now been below the 300,000 threshold, which is considered consistent with full employment, for 109 weeks in a row while continuing claims for Mar 25th decreased to 2.028m from 2.052m previously. This comes following a stronger than anticipated private ADP employment report on Wednesday that suggested 263,000 jobs were added in the month of March. The ADP can be a fairly good predictor for the U.S. non-farm payroll data which will be released on Friday, however it has been known to miss so a strong payrolls reading is not guaranteed.
Yields have decreased over the past month since the Fed raised rates at the March 15th meeting, the first chart below shows the US 10-Year treasury yield approaching support at the 2.3% level. A strong non-farm payrolls reading tonight with expectations around 180,000 should see yields find support at this level once again.
The U.S. dollar index advanced +0.14% boosted by a -0.28% decline in the Euro as ECB President Mario Draghi and chief economist Peter Praet continued to highlight that while downside risks were lessening in the Eurozone, there was no need for the ECB to begin changing the current monetary policy. This was in line with the ECB minutes from the March 9th meeting which were released overnight stating that changes to forward guidance by officials could result in a sharp upward shift in market rates which would be premature given core inflation is yet to show any sustained upwards momentum.
Asian equities were generally lower with the Korean KOSPI down -0.37%, as were both the Japanese Nikkei & Topix falling -1.4% and -1.63% respectively and the Australian S&P/ASX 200 declined -0.34%. Still European and U.S. equity markets rebounded, the Euro Stoxx 600 rose +0.18% as did the DAX +0.11%. Both the S&P 500 and Nasdaq 100 gained +0.19% and +0.04% each, with gains in the S&P500 led by energy (+0.80%) and financials (+0.56%).
Locally the Australian dollar continued recent weakness, declining -0.28% against the US dollar. The first chart below shows the price now approaching support at the 0.75 level marked by prior highs and lows. A break below this level would confirm a double top pattern at the February and March highs around the 0.7750 level. This is a fairly typically reversal pattern that would suggest the decent probability of a significant retracement of the December the February gains.
Locally we can expect to begin trading on a strong note with ASX SPI200 futures up +16 points in overnight trading.
Data releases:
· German Industrial Production (MoM & YoY Feb) 4:00pm AEDT
· German Trade Balance (MoM Feb) 4:00pm AEDT
· UK Trade Balance (MoM Feb) 6:30pm AEDT
· BOE Governor Mark Carney Speaks 7:00pm AEDT
· Canadian Unemployment (MoM Mar) 10:30pm AEDT
· US Non-farm Payrolls (MoM Mar) 10:30pm AEDT
Chart 1 – U.S. Ten Year Treasury Yield
Chart 2 – AUD/USD
Source: Rivkin, RivkinTrader