Senior Market Strategist

Total Content 77

Articles 59

Non-Farm Payroll look-ahead

By David Morrison  |  05/04/2018 13:48
”non

A look at what to expect from tomorrow’s important data release

Tomorrow sees the latest update for arguably the most important, and potentially market-moving, global data release – US Non-Farm Payrolls. But given the current low rate of unemployment (which is expected to fall to a fresh 17-year low of 4.0% for March), market participants will once again focus on Average Hourly Earnings for any signs of a pick-up in wage growth. Previously this has fed straight through to inflation expectations, raising concerns that the Federal Reserve may raise their anticipated pace of monetary tightening. This was particularly evident in early February when Average Hourly Earnings jumped to an 8-year high of 2.9% year-on-year, coming in alongside a better-than-expected payroll report. The news helped trigger a spike in bond yields and volatility, catalysing the biggest sell-off in global equities in two years. But last month Average Hourly Earnings dropped back sharply while payrolls soared. This saw equities rally, topping off a post-corrective bounce which has since faded.

Volatility elevated

Tomorrow’s update comes amid the sharpest and most protracted sell-off in equities since early 2016. This was when a second clumsy Chinese currency devaluation in less than six months rocked financial markets leading to a corrective pull-back of over 10% in the major US stock indices in the space of six weeks. Today we see stock market volatility heading back up to “normal” levels – at least when compared to the last few years. We’re also seeing large swings in bond yields as investors dump US Treasuries on inflation fears only to pile back in again as a sanctuary from tumbling equities. Investors are having to adjust to a dramatic shift in market sentiment since early February. The “buy the dip” strategy which has worked so well over the last few years seems in danger of morphing to “sell the rallies”. This comes as the euphoria of Trump’s tax cuts and spending plans has evaporated to be replaced by fears of growing budget deficits, the possible imposition of trade tariffs, a dysfunctional White House, troubles with the giant tech corporations, an expensive stock market and a withdrawal of monetary stimulus by the Federal Reserve.

Scope for a surprise

Some of these concerns ebbed yesterday after St Louis Fed President James Bullard said there should be no further rate hikes in 2018. Then Larry Kudlow, Trump’s new chief economic advisor, said that markets shouldn't overreact to trade tensions, as Trump’s China tariffs are currently just proposals. On top of this, stock market bulls are looking forward to a strong first quarter earnings season which kicks off next week, although given the tough year-on-year comparisons, there’s scope for disappointment. Given this backdrop many analysts are saying that tomorrow’s data is of little importance. However, there’s plenty of scope for another surprise.

Focus on wage growth

Analysts are looking for March Non-Farms to come in around 190,000. This would keep the six-month average around 186,000 which is very healthy with unemployment at 4.1%. Average Hourly Earnings are expected to rise 2.7% year-on-year, representing a modest pick-up from February’s 2.6%. But if this spikes up to 2.8/2.9% and payrolls are strong, then investors will once again factor in a pick-up in the pace of rate hikes from the Fed. The dollar should spike higher, sending the Dollar Index further above resistance around the 90.00 level. We may see an initial rally in stock indices, but the danger is that this fades as investors once again focus on tighter monetary policy from the Federal Reserve.

Investors still nervous
 
So, bulls will be hoping that wage growth is benign, staying around 2.6%. This should help to calm markets and give asset prices a lift. But it may not be enough on its own to cancel out all investor concerns.
 
 
Any information, analysis, opinion, commentary or research-based material on this page is for information purposes only and is not, in any circumstances, intended to be an offer of, or solicitation for, a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any person acting on it does so entirely at their own risk and GKFX accepts no responsibility for any adverse trading decisions. You should seek independent advice if you do not understand the associated risks.
 

Share

Author's Other Opinion & Analysis

  • Dollar spikes higher
    By David Morrison  |  11/01/2019 14:31

    EURUSD falls back below 1.1500

  • Another look at the EURUSD
    By David Morrison  |  18/04/2018 15:06

    Trump accuses China and Russia of “playing the currency devaluation game”.

  • S&P 500 update
    By David Morrison  |  17/04/2018 15:53

    The US stock market steadied last week

  • Weekly market wrap
    By David Morrison  |  13/04/2018 15:19

    The first quarter earnings season got underway last week

  • EURUSD update
    By David Morrison  |  11/04/2018 08:14

    Still range-bound near highs

  • Weekly market wrap
    By David Morrison  |  06/04/2018 15:29

    US payrolls disappoint

  • S&P 500 update
    By David Morrison  |  04/04/2018 14:31

    S&P 500 breaks below 200-day moving average

  • Weekly market wrap
    By David Morrison  |  29/03/2018 13:38

    This Easter holiday couldn’t really come at a worse time

  • S&P 500 - update
    By David Morrison  |  27/03/2018 13:47

    The S&P since February's sell-off

  • Weekly look-ahead
    By David Morrison  |  23/03/2018 16:59

    Holiday-shortened week

  • NASDAQ leads sell-off
    By David Morrison  |  22/03/2018 15:53

    Markets lead lower by tech sell-off

  • Fed meeting in focus
    By David Morrison  |  21/03/2018 10:50

    Investors on edge ahead of Fed decision

  • Weekly Outlook
    By David Morrison  |  16/03/2018 15:41

    Fed meeting in focus

  • S&P 500 - the technical picture
    By David Morrison  |  14/03/2018 16:34

    This week has seen the US majors pull back from their best levels

  • Weekly look-ahead
    By David Morrison  |  09/03/2018 16:16

    The headline payroll number smashed above the high end of expectations

  • Non-Farm Payroll look-ahead
    By David Morrison  |  08/03/2018 14:30

    All eyes on wage growth

  • ECB and BOJ meetings in focus
    By David Morrison  |  07/03/2018 17:24

    Investors experienced a shock last month

  • Weekly Outlook
    By David Morrison  |  05/03/2018 10:15

    This is a big week for financial markets

  • Euro bounces, but political uncertainty remains
    By David Morrison  |  02/03/2018 11:01

    The euro rallied sharply overnight

  • Weekly look-ahead
    By David Morrison  |  23/02/2018 16:58

    US stock index futures were pushing higher ahead of Friday’s US open.

  • FOMC minutes and the German DAX
    By David Morrison  |  22/02/2018 14:33

    Investors were initially wrong-footed by minutes from a Federal Reserve meeting.

  • FOMC minutes in focus
    By David Morrison  |  21/02/2018 11:47

    All eyes are on the release of minutes from the Fed’s January FOMC meeting

  • Situation remains unresolved
    By David Morrison  |  20/02/2018 13:09

    The stock market correction may have further to go

  • Weekly Outlook
    By David Morrison  |  16/02/2018 16:02

    Global stock indices fought back last week

  • Out of the woods? Perhaps not
    By David Morrison  |  15/02/2018 13:37

    Yesterday brought the latest update on US inflation

  • Inflation and the S&P 500
    By David Morrison  |  12/02/2018 16:30

    This article will focus on the S&P 500

  • Weekly Outlook
    By David Morrison  |  09/02/2018 16:35

    Friday was a roller-coaster session to round off a tumultuous week.

  • What now?
    By David Morrison  |  08/02/2018 15:54

    The current sell-off in global equities has been a long time coming.

  • Traders focus on volatility
    By David Morrison  |  06/02/2018 16:55

    Yesterday the Dow posted its biggest ever one-day loss in points terms

  • Rising yields lift troubled dollar
    By David Morrison  |  05/02/2018 16:17

    The US dollar stages a modest recovery.

  • Weekly look-ahead
    By David Morrison  |  02/02/2018 16:12

    Equity sell-off resumes while dollar rallies

  • Time for a correction?
    By David Morrison  |  31/01/2018 16:22

    Equities retreat as yields push higher

  • Crude prices dip
    By David Morrison  |  29/01/2018 15:57

    Oil slides as dollar rallies

  • Weekly look-ahead
    By David Morrison  |  26/01/2018 15:16

    What's in store for key markets

  • Dollar hits fresh 3-year lows
    By David Morrison  |  24/01/2018 16:38

    US dollar plunges ahead of Trump's Davos speech

  • Wall Street hits fresh highs
    By David Morrison  |  23/01/2018 15:46

    The three-day US government shutdown ended on Monday

  • Market Round-up
    By David Morrison  |  22/01/2018 16:53

    Monday marked day three of the US government shutdown.

  • Weekly look-ahead
    By David Morrison  |  19/01/2018 16:30

    The last couple of weeks have seen a number of significant technical breakouts

  • S&P 500 – Weekly Chart
    By David Morrison  |  18/01/2018 15:24

    Putting price action into context

  • Crude pulls back from three-year highs
    By David Morrison  |  17/01/2018 16:32

    On Monday WTI and Brent hit their highest levels since early December 2014

  • Gold, the dollar, bond yields and inflation
    By David Morrison  |  16/01/2018 15:00

    But in line with conventional wisdom the dollar’s sell-off triggered a sharp rally in gold.

  • Weekly look-ahead
    By David Morrison  |  12/01/2018 16:50

    Earlier in the week the US majors had a slight wobble

  • Gold traders eyeing the dollar
    By David Morrison  |  11/01/2018 15:48

    This article considers the recent price action on gold

  • Chinese news rattles markets
    By David Morrison  |  10/01/2018 15:33

    Chinese officials recommend “slowing or halting”

  • Could stocks rally further?
    By David Morrison  |  08/01/2018 17:00

    Most European stock indices ended Monday’s session in positive territory, playing catch-up after Wall Street’s sharp rally last week.

  • Weekly look-ahead
    By David Morrison  |  05/01/2018 15:55

    We rounded off this week with the final Non-Farm Payroll report of 2017. Headline payrolls rose 148,000 which was well below the 190,000 increase expected.

  • Dow smashes through 25,000
    By David Morrison  |  04/01/2018 16:07

    Yesterday the US majors ended at fresh all-time highs and this helped to lift Asian Pacific indices overnight.

  • US indices hit fresh record highs
    By David Morrison  |  03/01/2018 16:08

    US stock indices made another strong upside move yesterday which took both the S&P 500 and NASDAQ Composite up to fresh record highs. The buying has continued throughout today’s session

  • Mixed start to New Year
    By David Morrison  |  02/01/2018 16:56

    The first trading day of 2018 brought a mixed session as far as global stock indices were concerned.

  • New Year round-up
    By David Morrison  |  29/12/2017 15:22

    As 2017 draws to a close, here’s a quick round-up of how a few key markets look going into next year.

  • What's Next for Crude Oil?
    By David Morrison  |  19/12/2017 14:42

    This article will focus on price action in the front month WTI contract rather than Brent. WTI tends to provide better technical signals than Brent – not always, but often enough to give a cleaner overall picture.

  • Equities soar on US tax reform hopes
    By David Morrison  |  18/12/2017 16:10

    US and European stock indices soared on Monday as investors priced in an increasing probability that President Trump will deliver on his promise of tax reform before year-end.

  • Weekly Outlook
    By David Morrison  |  15/12/2017 14:26

    Here’s a brief heads-up for the week beginning 18th December

  • Central Bank monetary policy meetings
    By David Morrison  |  14/12/2017 15:48

    Here’s a quick rundown of the highlights from this week’s monetary policy meetings from the European Central Bank, Bank of England and US Federal Reserve

  • Look-ahead to the Federal Reserve meeting
    By David Morrison  |  13/12/2017 08:49

    Crucially, this week’s Fed meeting also brings an update to the FOMC’s Summary of Economic Projections.

  • Cboe launches Bitcoin futures
    By David Morrison  |  11/12/2017 16:26

    Listing Bitcoin futures on mainstream exchanges should ultimately help to boost the digital currency’s legitimacy and lead to more widespread acceptance.

  • Non-Farm Payroll look-ahead: 6 things you should know
    By David Morrison  |  08/12/2017 09:55

    So, here’s what to look for: the consensus expectation is for the headline Non-Farm Payrolls to rise 200,000 in November.

  • EURUSD – key events to consider
    By David Morrison  |  06/12/2017 17:07

    The dollar got a boost this week on the increased likelihood of an agreement on US tax reform being reached before the year-end.

Show More Articles
Back

Login to Market Insight Account

Your Market Insight account gives you access to the tools that we offer our customers including our
Technical Studies & Sentiment for your accounts.

Forgot Password?

Don't you have a Market Insight account? With a few easy steps you can easily register to Market Insight

Create a Market Insight's Account

Your Market Insight account gives you access to the tools that we offer our customers including our Technical Studies & Sentiment for your accounts.

register_ty

Thank you!

Welcome to Market Insight family!

You have succesfully completed the registration.
We will send you an e-mail to give you some
instructions and our Terms and Conditions!
Our account representatives will be contacting you as
soon as possible. If you have any further questions
please do not hesitate to mail us via info@marketinsight.com