Market Commentary: Positive job numbers still do not meet expectations

The markets sold off in the US last Friday despite a positive jobs number. The issue being that although we have seen an improvement in the jobs market, the jobs figure needs to strengthen even further. However, the market is concerned that the Federal Reserve will change its policy and slow down economic stimulus despite the job numbers still not being at the appropriate level.

International Monetary Fund Managing Director Christine Lagarde said job creation in the U.S. is not at its potential, as regulatory and policy uncertainties deter some companies from hiring. US payrolls rose 192,000 in March compared with the markets expectations of 200,000.

Asian stocks fell for the first time in nine days, snapping the longest winning streak on the regional gauge this year, with telecommunication and technology shares leading declines.

Japan’s Topix index also traded lower. The Bank of Japan, which begins a two-day policy meeting today, may double purchases of exchange-traded funds as part of a second round of monetary easing.

In Europe, markets also opened lower following the negative session in the US and followed by Asian markets. However, the situation in Europe is different from that if the US. European Central Bank President Mario Draghi’s version of QE might turn out to be rather different from the type deployed by the Federal Reserve. As ECB officials try to stamp out the risk of deflation, Draghi gave his strongest signal so far that the ECB is prepared to embrace a policy that has become a byword for large-scale government bond purchases.

And yet, the structure of the euro region’s economy means the ECB will also need to find its own approach to quantitative easing. Draghi is using the QE label as a tool to convince investors that policy makers in the 18-nation euro region are determined to prevent a Japan-style deflationary spiral. At the same time, there are political and economic obstacles to a euro-wide wave of sovereign-bond purchases, and a program aimed at boosting bank lending may prove to be more effective.

Stock to watch: Lafarge

Holcim Ltd. (HOLN) and Lafarge SA (LG) agreed to a merger to create the world’s biggest cement maker, with more than $40 billion in sales and cut overcapacities and energy expenses.

Bruno Lafont, the chief executive officer of Paris-based Lafarge, will lead the merged entity, the companies said today. Wolfgang Reitzle, who was to become chairman of Jona, Switzerland-based Holcim, will assume that role for the enlarged business, to be called LafargeHolcim. Both boards approved the combination.

The deal, structured as an all-share merger, will lead to synergies of more than 1.4 billion euros ($1.9 billion) and probably close in the first half of 2015, according to Holcim and Lafarge. The companies said they will sell assets, especially in Europe, to get regulatory approval.

Companies reporting today

No Stoxx Euro 600 earnings scheduled
Air France (AF FP) 8am, March traffic

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