Markets Live: Jobs data loom
The equity rally looks set to roll on into today’s session, writes IG market analyst Angus Nicholson:
After an impressive night for European and US equities, the S&P 500 now sits just 2.4 per cent off its all-time highs. Quite an impressive feat considering there is little excitement for much of the global macro backdrop.
The S&P 500 VIX volatility index has pulled back to 13.8, close to a full standard deviation below its long term average of 21.5. China’s trade data provided support to commodities overnight with both iron ore and copper gaining. The pick-up in China’s imports provide further evidence of its return to investment-driven fiscal stimulus, providing some fundamental support to the recent moves in commodities, emerging markets and the Aussie dollar.
This is all pointing to a strong open to the Asian session.
The yen has seen a bit of weakness with the USD/JPY cross rate moving back to the 109 yen per US dollar handle, and this should help move the Nikkei strongly higher today. The materials sector in the FTSE had a wild night as it gained over 5 per cent, and BHP and Rio both had spectacular nights as they rose 9.2 per cent and 7.6 per cent, respectively.
The ASX is subsequently looking to have a very strong day, we currently are calling for it to open 0.9 per cent higher. But the fact that investor appetite for the heavily-weighted banking sector looks to be returning could help see an even stronger day. The key focus in Australia will be the often volatile monthly employment numbers with the market expecting 15,900 new jobs, which would be quite a jump from the previous three months.
Macquarie Group shed close to 15 per cent of its US investment banking workforce this month, according to people familiar with the matter.
The action comes as other international banks reconsider their US investment banking strategy. Earlier this week, Japan’s Nomura Holdings, for example, laid off more than two-thirds of the bankers working at its leveraged buyouts group.
Like Nomura, Macquarie has focused in the last few years on advising on and financing private equity deals, as a way to gain investment banking market share with corporate America. But most of the layoffs at Macquarie, which were announced internally earlier this month, targeted industry coverage rather than leveraged buyout bankers.
The job cuts came as Macquarie merged several industry groups in its investment banking division, the people said on Wednesday.
The industrials group was disbanded and some chemicals bankers joined the infrastructure team, the people said. The consumer group was merged with the gaming and leisure group, while the healthcare services information technology group was absorbed by the technology, media and telecommunications group, the people said.
In total, Macquarie’s US investment banking division will continue to employ more than 200 staff, the people said, asking not to be identified because the layoffs have not been announced publicly. A Macquarie spokesman declined to comment.
Walking out the door.. Macquarie is said to be laying off US investment bankers. Photo: Bloomberg
Iron ore keeps on delighting the bulls. The raw material that was battered for the past three years has vaulted back above $US60 a metric ton after data from China added to signs that Asia’s top economy may be on the mend and local mills’ expanding margins spurred increased demand.
Ore with 62 per cent content delivered to Qingdao in China rose 2.1 per cent to $US60.48 a dry tonne overnight, the highest since March 8, according to Metal Bulletin. Prices have gained for three days, taking the advance this year to 39 per cent. That’s a turnaround from 2015, when the benchmark plummeted 39 per cent on a global glut and weakening steel demand in China.
The raw material has staged a surprise rally in 2016 after policy makers signalled they’re prepared to support growth, mills boosted purchases even as port stockpiles climbed, and steel prices advanced. Data on Wednesday showed China’s total exports jumped the most in a year, signalling that the second-biggest economy may be stabilising.
Miners’ shares have surged. Vale, the world’s largest iron-ore producer, climbed as much as 8.4 per cent in Sao Paulo to its highest intraday since October. In London on Wednesday, BHP Billiton advanced 9.2 per cent. Rio Tinto rose 7.6 per cent in London after increasing in Sydney trading to the highest since November.
“As margins are very high currently, mills have an incentive to build steel inventories,” said Zhao Chaoyue, an analyst at China Merchants Futures in Shenzhen. “They’re also more willing to accept higher iron ore prices.”
Mills in China, which account for about half of global production, have been boosting output after the Lunar New Year slowdown in February as property prices in some bigger cities advanced. Rising prices for steel have improved their profit margins, reversing a squeeze from last year.
“As margins are very high currently, mills have an incentive to build steel inventories,” said Zhao Chaoyue, an analyst at China Merchants Futures in Shenzhen. Photo: Getty Images
Global equities erased losses for the year, while commodities from copper to grains surged as an improvement in China’s economic outlook spurred a rally in risk assets. US stocks climbed to a four-month high as JPMorgan Chase’s earnings topped estimates.
The S&P 500 index capped its biggest two-day rally since March 2, while Brazil’s Ibovespa hit a 10-month high. European shares climbed the most in a month and Russia’s benchmark closed at the highest level since 2008.
Copper and iron ore jumped as haven assets including the yen and gold retreated. The US dollar rallied the most in three weeks after falling to a nine-month low.
After concern over China’s outlook roiled financial markets during the first six weeks of the year, data Wednesday showing exports rose the most in a year last month added to signs the slowdown may not be as deep as some investors feared, fuelling the recovery in stocks from Asia to the US.
Speculation the oil market will soon find some enduring stability is also helping prop up equities, while JPMorgan’s results countered concern over what’s projected to be the worst American earnings season since the global financial crisis.
“It’s a strong day overseas and China data was much better than expected,” Mark Kepner, an equity trader at Chatham, New Jersey-based Themis Trading, said. “While JP Morgan had a tough quarter, they still beat estimates. If earnings come in better than expected — with expectations so low — if we have even a decent beat, you may see us break out.”
The Stoxx Europe 600 Index rose 2.5 per cent, the most since March 11, for a fourth day of gains. Commodity producers — one of the only industry groups that is posting gains for the year — were among the biggest advancers. The FTSE 100 Index, which is weighted toward resource companies, turned positive for the year.
Global shares, including in London, jumped overnight. Photo: Chris Ratcliffe
Local shares are poised to lift as miners and base metals advanced on China’s trade data. Wall St rose on banks, while BHP surged 9 per cent in London despite oil easing.
Here’s what you need2know:
- SPI futures up 37pts or 0.7% to 5074 at about 6.45am Sydney time
- AUD at 76.53 US cents, 83.66 Japanese yen, 67.88 Euro cents and 53.89 British pence
- On Wall St, Dow +1.1%, S&P 500 +1%, Nasdaq +1.6%
- In Europe, Stoxx 50 +3.3%, FTSE +1.9%, CAC +3.3%, DAX +2.7%
- In London, Anglo +11.1%, BHP +9.2%, Rio +7.6%, Glencore +6.7%
- Spot gold flat at $US1241.95/oz
- Brent crude -1.7% to $US43.91/bbl
- Iron ore +2.1% to $US60.48
What’s on today:
- Labour Force for Feb at 11.30am AEST. PM Turnbull arrives in China for his first state visit, accompanied by a modest 1800-person delegation.
- Kiwi manufacturing PMI for March
- Bank of England releases its latest interest rate decision
- Singapore 1st-Qtr GDP
- Euro-area CPI
- US consumer prices, US jobless claims (weekly)
- US earnings: BlackRock, Bank of America, Wells Fargo, Delta Air Lines
Stocks to watch:
- Can banks make it three gains in three sessions?
- Macquarie announces US investment banking job cuts as JP Morgan reports better than expected earnings
- Rio wil hold its AGM in London tonight
- Transurban releases quarterly sales
- Bendigo & Adelaide Bank has a strategy update
- China will require registration of all baby formula from 2018 – watch the likes of Bellamy’s, A2 Milk and Bega Cheese.
- Losses widen at Melco Crown‘s Philippine casinos
- Whitehaven Coal and Sandfire Resources report quarterly production numbers
- Origin Energy and Bluescope raised to outperform at Credit Suisse
Good morning and welcome to the Markets Live blog for Thursday.
Your editor today is Patrick Commins.
This blog is not intended as investment advice.
BusinessDay with wires.