The Overnight Report: Back From Holiday
By Greg Peel
The Dow closed up 88 points, or 0.6%, while the S&P gained 0.5% to 1640 and the Nasdaq added 0.2%.
Ahead of yesterday's trade on Bridge Street the impact of strong US jobs numbers had been felt as a surging US dollar sent both the Aussie dollar and base metal prices tumbling. Last week a lower Aussie was enough to trigger significant offshore selling, and in isolation lower metal prices are never good for the materials sector. The materials sector responded as expected, but as the session ended it was clear any offshore selling impact was not as significant as we had become used to this month.
Weakness may have been aided by another poor ANZ job ads series reading. Yet despite the close correlation between job ads and the unemployment data over several years, the last few months have featured divergence, leaving economists scratching their heads. Fewer job ads should imply job losses, but to date that implication is yet to show up in the unemployment rate. The June jobs numbers are due on Thursday.
Global trading returned somewhat to normal last night after the unofficial four-day long weekend in the US. The response to Friday's healthy US job numbers had been sharp in thin markets, with the greenback and US bond yields in particular spiking. There were no US data releases of any great importance last night, and while stocks continued their upward trend, the dollar, yields and metal prices all corrected to a reasonable degree.
The US dollar index fell back 0.3% to 84.21. The Aussie rose 0.8% to US$0.9135 and gold rebounded US$13.90 to US$1236.90/oz. The yield on the US ten-year bond, which shot up over 20 basis points on Friday night, fell back 7bps to 2.65%.
On Friday night amongst thin trade on the LME the decision was to sell base metals on the back of the stronger US dollar. But the US dollar was stronger on the implication of a stronger US economy, so in a busier market last night metal prices rebounded.