Global Markets Overview – July 4, 2014

US equities extended gains on the back of a monster jobs report which essentially reassured investors that the US economy is on track for a Q2 bounce. This saw the S&P close at an all-time high for the 25^th time this year. The non-farm employment change reading for June showed a whopping 288,000 jobs added while the unemployment rate dropped to 6.1%. Both readings smashed expectations and this helped push the US dollar higher across the board. Additionally there were also upward revisions for April and May, confirming the strong momentum in jobs. However, wage pressure remained benign and this will be a minor concern.

We also had some activity in the eurozone with peripheral bonds rallying after the ECB somewhat indicated no limitations to how the banks use funds from the LTROs. The market was expecting these funds to be mainly directed at lifting household spending and supporting small businesses. However, Draghi didn't reinforce this fact which seemed to make the market feel there weren't restrictions.

Big moves for euro and yen against greenback

The overall impact of the activity on the euro and USD was a weaker EUR/USD as the pair pulled back to 1.3600. ECB President Mario Draghi also commented on the exchange rate and essentially said he'd be hoping stimulus would have the capacity to nullify the impact of the high exchange rate. Perhaps the biggest beneficiary of the US dollar move will be Japan today. The rally took USD/JPY back above 102 and the pair is currently trading around 102.20.

The Nikkei is pointing to a 0.7% rise at the open to 15,428 and this will see Japan lead the region. Data will be limited in today's Asian session and this will be compounded by the fact the US has a bank holiday today.

Another positive start for the ASX 200

The ASX 200 is pointing to a 0.5% rise to 5518 which would see it trade at one month highs. As of yesterday's close, the ASX 200 was already up 0.8% for the week. It's been a good start to the financial year for local shares and it looks like we are on track to finish off the week with a bang. Cyclical names should be underpinned by the buoyant risk mood today and I suspect the materials could be leading the way yet again.

Iron ore surged nearly 2% to 96.50 and this will be supportive of the pure play recovery. Most of the other metals also posted gains and this is likely to remain a theme as long as global activity continues to pick up. The banks might be lifted by the developments out of the Eurozone regarding the LTROs. CBA will remain in focus after agreeing to review financial advice for nearly ten years.

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