Morning Note - US Jobs data a positive... but don't get too carried away

by James Gerrish 05 April 2011

** 05/04/11  - 9.44am  -  by James Gerrish** 

(Click to View Charts)       S&P/ASX 200  (Australia) -  Dow Jones Industrial Average (US)     -     FTSE 100 (UK) 
 
  • Employment data came out on Friday in the States and slightly beat expectations with +216,000 jobs created last month. 
  • I suggested last week we'd likely see a positive print and it was enough to push stocks higher on Friday. 
  • Drilling down a little deeper in the jobs number and we see that the major contributors have been manufacturing and technology companies. 
  • Manufacturing is benefitting from strong demand courtesy of the low USD while Tech companies are seeing strong demand from US corporates flush with cash and looking to deploy it in better systems. 
  • The private sector has now added 1.8 million jobs and the unemployment rate has fallen 1% in the last 4 months. 
  • I don't want to get too carried away as there is still a long way to go in the US recovery but they are headed in the right direction. 
  • They've now added about 17% of the jobs that were lost during the crisis with 13.5 million people still unemployed. 
  • Its probably a little bit behind previous recoveries in relation to adding jobs and the speed they are being created, and we are seeing a theme of lower wages - and this probably goes some way to explaining the performance of US Corporates - getting workers at cheaper rates and this will have a more negative impact on American standard of living down the track. 
  • So clearly, I think we're seeing further signs of a US recovery and this is supporting the recent bounce in equities but we still have quite a long way to go. 
  • The consensus is for QE2 to be wound down in June. Although I think this is the likely scenario, the US will try to keep interest rates lower for longer given important of manufacturing in jobs creation. 
  • Last night, we saw the DOW JONES up +23 points or +0.19% to close at 12400 - this was on very light volume. 
  • From a technical perspective, the market does look stretched short term. We've had a very strong bounce and momentum indicators are overbought - but bear in mind that they can stay overbought for quite some time - SEE CHART
  • Don’t get me wrong, I'm certainly bullish in the market towards 5000 on the S&P/ASX 200 however I think we'll need some type of short term pullback or consolidation before getting there. 
  • Locally, the SPI FUTURES are pricing a rise of +9 points on the open this morning 
  • Stocks trading overseas
    •  
    • In New York, News Corp rose by US$0.03 to US$18.94, equivalent to A$18.28, A$0.23 above its last close on the ASX.
    • ResMed fell by US$0.21 to US$29.62, equivalent to A$2.86, A$0.02 below its last close on the ASX.
    • In London, Rio Tinto rose 59.0 pence to £44.78, A$0.92 higher in Australian currency terms.
    • BHP-Billiton rose 5.5 pence to £25.18, A$0.09 higher in Australian currency terms.
    • Henderson Group Plc rose 1.05 pence to £1.74, A$0.02 higher in Australian currency terms.
  • Key investment themes remain Energy, Mining Services, US Recovery and High Yield through the banks
  • Short term trades looking promising in: LNC, IAU, IFL, MIN, PRU, SIP, UGL & WHC
James Gerrish 
(02) 9375 0117

Disclaimer

James Gerrish is an Authorised Representative (Rep No. 352904) of Shaw Stockbroking Limited ("Shaw Stockbroking"). Shaw Stockbroking is a holder of Australian Financial Services Licence No 236048. Shaw Stockbroking, its directors, officers, associates and employees each declare that they, from time to time, may hold interests in financial products and/or earn brokerage, commission, fees or other benefits from financial products mentioned in this e-mail or attached documents. Unless specifically stated within this page or an attached document, any information communicated by this e-mail constitutes unsolicited general financial product advice which has been compiled without regard to any investor's individual objectives, financial situation or needs. It is not specific advice for any particular investor. Before making any decision about the information provided, you need to consider the appropriateness of this information having regard to your individual objectives, financial situation and needs and consult your adviser. Any indicative information and assumptions used here are summarised and also may change without notice to you, particularly if based on past performance or relate to a future matter.
 

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