Global Markets Overview – July 3, 2014

It was a busy night on the US economic calendar with the ADP jobs report and comments from Fed chair Janet Yellen hitting the wires. The ADP non-farm employment change came in at a much-better-than-expected 281,000, smashing estimates of 207,000. This saw expectations ramp up as we head into the official non-farm payrolls reading later today. With the July 4^thIndependence day holiday on Friday, the data is being released on Thursday instead of the traditional Friday. The market is expecting to see another print north of 200,000 and no doubt sentiment will be riding high following this ADP reading. Yellen essentially dispelled the argument that tighter monetary policy may be required to promote financial stability. Instead she pointed towards supervision and regulation playing a primary role in financial stability.

The overall impact of the developments in US trade was a firmer US dollar as bonds weakened. USD/JPY was perhaps the biggest beneficiary of this as the pair rallied to 101.84. This should underpin the Nikkei at the open today and perhaps encourage further buying. Japanese equities have been rising in the absence of yen weakness and therefore this move should give a kicker.

AUD in focus ahead of Stevens speech

Risk currencies such as the AUD lost some ground to the greenback on the back of the move. AUD/USD dropped to 0.944 where it eventually found some stability after having halted its positive run on the back of yesterday's disappointing trade balance numbers. The gains stuttered in the 0.950 region but I still feel traders may be looking to buy the dips. There is an uptrend which comes in around the 0.940 mark and this could be where traders might look to buy.

On the Australian economic front we have Glen Stevens speaking at 11.00am (AEST). Any comments suggesting taking action on the firm AUD could lead to a deeper pullback and see support levels tested. At the same time we also have China's non-manufacturing PMI which could be market moving. This will be followed by building approvals and retail sales at 11.30am, of which the market is mostly expecting to show signs of improvement. This all makes for a very interesting Asian session for the AUD.

ASX 200 to extend gains

Ahead of the local market open we are calling the ASX 200 up 0.3% at 5470. This will see the momentum continue after a stellar run yesterday. Traditionally July is a good month for local shares and there is a good chance most of the cash that was on the sidelines in June will return to the market this month. Gains for gold and iron ore could support some of the materials playstoday.

Atlas Iron's rating was cut to stable (from positive) by Moody's as the commodities picture continues to bite. It's clear a lot of these iron ore will have to run lean models to remain profitable and there are reports BHP is looking at further job cuts.

Outside of the resource space there are reports suggesting ASIC wants independent valuations of David Jones and Country Road. Should be interesting to see how the share prices react today.

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