Market commentary: Markets rest as investors await September’s US Jobs Report

On Thursday, following the worst quarter since 2011, markets witnessed a mixed session, as US stocks opened lower amid uncertainty on the future prospects of global growth and investors’ cautiousness ahead of the key economic data due for release today. US equities managed an end of the session rally, which helped the S&P 500 and the Nasdaq to close modestly higher, led by raw material names and the health-care sector, after both indices had dropped over 1% earlier in the day.

In Asia, equity markets also posted a mixed session, with Chinese stocks closing in positive territory, the Nikkei 225 closing flat on the day, and Australian stocks trading lower, with the S&P/ASX 200 dropping over 1%.

In contrast, European markets posted a strong opening this morning ahead of the September’s US Jobs Report due today at around 2.30pm, with investors apparently betting on positive news, which would confirm that the world’s largest economy continues to strengthen despite a strong dollar and an equity markets’ correction started in August.

Investors’ attention will be focused once again on the Federal Reserve, as a resilient number for September’s job additions is likely to provide an additional reason for Janet Yellen to finally trigger the long anticipated interest rate hike at the FOMC’s December meeting.

Analysts are expecting another solid Jobs Report for today, estimating that the US economy added around 200,000 new jobs in September, which would help to hold the country’s unemployment at 5.1%, the lowest level since before the 2008 financial crisis.

Slightly in contrast with the positive optimism of a large number of market participants are the manufacturing US data released on Thursday, which showed that the sector barely grew in September, highlighting that the strength of the US currency is starting to weight on output and it is likely to show a negative impact on corporate earnings, which will kick off later this month. Although optimism may overweigh uncertainty, markets are likely to remain volatile without moving toward a clear direction, as estimates for a strong Job Report have already been largely priced in by traders and analysts alike.

The US dollar remains one of the most resilient currencies among major developed countries, with the Greenback holding on to the current high levels. Despite dropping in the aftermath of the FOMC meeting last month, the US currency has since gained over 2.5% against the Euro, returning above the psychological level of 0.8950, while it has been trading within a range against the Japanese Yen, closing substantially flat for the month of September.

Within a market environment dominated by high volatility and uncertainty, the recent correction has opened the doors for value investors to take long positions on cash rich, large cap names which have been accounting for the majority of the gains recorded since the bottoming of the correction last month. In fact, the three largest companies by market capitalization: Apple Inc, Microsoft Corp. and Exxon-Mobil Corp. have so far accounted for about 20% off all gains following the most recent 10% selloff.

With European markets rebounding on US Jobs Report’s optimism and equity futures pointing to a positive opening for US markets, investors may wish to consider re-entering the market ahead of a possible end of the week rally, taking advantage from another volatile week that, on average, has pushed stocks lower towards attractive price entry levels.

Disclaimer:

This article was issued by Paolo Zonno, Trader/analyst at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.