Stock Markets Higher after Very Strong Employment Data
Stock markets closed last week on a positive note as most of the market was caught off-guard by the extent to which macroeconomic data could change market expectation and actually be the driving factor behind spread betting trading decisions. Specifically, most of the positivity came after the October US Non Farm Payrolls, which showed that the employment sector is performing much more strongly than analysts has previously expected. The overall result was that the Dow Jones Industrial Average pushed to a new record closing valuation, as the stronger employment data essentially suggests that the manufacturing and industrial sectors are likely to outperform going forward.
But the gains were wide spread, global in nature, and could be seen in all industry groups. The DAX stock index also experienced some forceful gains after the European Central Bank (ECB) elected to reduce interest rates at its last meeting. Previously, market analysts had expected that the historically low benchmark rate of 0.5% would stance, given the relative stabilization seen since the region’s sovereign debt crisis began. Lower interest rates and a more accommodative policy stance at the ECB show that stock gains are likely to remain supported going into the end of the year.
But the main story was still the US jobs number, with more than 200,000 jobs added for the month of October. This adds to the argument that the Federal Reserve can begin cutting back on stimulus, and this is likely to be a central theme in the coming week.
Bullish movement in the S&P 500 continues, with prices holding positive into last week’s close. The Index is now within striking distance of its all time highs, and the upward momentum should push prices into the upper 1770s before the end of next week. To the downside, support comes in at 1745, so if we do see a break there expect the short term momentum to accelerate.
The FTSE 100 was last week’s stock market laggard, with the Index rolling over just ahead of critical resistance levels, and failing to match the end of week fireworks that were see in most other areas. Above, the main area to watch is resistance at 6780, as this is key in order to resume the uptrend. On balance, spread bettors should look to take short term sells in the FTSE, with stops just above 6780.
TMost of the positive activity in the DAX was seen in the middle of the week, but the main question going forward is whether or not the Index can maintain its foothold above the 9000 level. So far this has been the case, but it will be important to watch downside support levels in order to get a sense of when these gains might be ending. The first area to watch comes in at 9010, and if price fail to bounce off of this support, we are likely to see come profit taking.
About Richard Cox
University Teacher in International Trade and Finance. Specialty in technical/fundamental analysis of the commodities and currencies markets.