Optimism ahead of US jobs

Equity markets await US Nonfarm Payrolls

Stock markets ending a strong week on a high ahead of the US jobs report, with futures modestly higher and Europe making decent gains.

This week has been just what the doctor ordered after weeks of unease and growing anxiety in the markets. Whether driven by the Reddit rebellion, a lack of trust in the Fed to not intervene too soon in the recovery or just a normal corrective move following a powerful run in uncertain times. Whatever the cause, investors will be going into the weekend somewhat relieved.

We’re not out of the woods yet. There’s every chance we could see stocks turn south again next week but it’s always good to get a week like this under your belt after a difficult period. And there is reason to be a little more optimistic.

After weeks of lockdown, numerous countries have turned a corner and every passing week of the vaccine rollout is one closer to being able to leave the house for something more than a jog. I’ve even found myself looking forward to getting the tube again; I can only imagine what the summer is going to be like as everyone breaks free.

As ever, investors have one eye on what’s happening in Washington and Democrats appear to be making good progress on their USD1.9 trillion stimulus ambitions. It may not be quite the partisan deal that Biden wanted – much to the annoyance of a number of Republican lawmakers – but time is the priority for the new administration. And they are confident they can get it over the line, with or without Republican support.

While that has contributed to the stock market rally this week, it’s also helped lift US Treasury yields once again. The 10-year is back around the levels it peaked at in the middle of January, the difference this time being that it doesn’t seem to have spooked investors in the same way. Perhaps the Fed’s soothing words and stronger economic data are putting investor’s minds at ease.

And nothing quite grabs the limelight like the US jobs report. Wednesday’s ADP payrolls have generated some optimism ahead of the data, despite their history for being far from reliable. Still, should the NFP number see a similar beat, it would be very encouraging in what has otherwise been a terrible month and position the US for a very strong recovery this year.

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam