Accendo Markets Weekly Roundup, 3 May 2013 - US Jobs surprise; Results season; Breakouts & New highs

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A good way to end the week! The sun’s out, there’s a long and hopefully sunny weekend to look forward to and the UK flagship equity index has regained the 6,500 handle – MIA since mid-March.

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After another round of mixed macro-economic data and major announcements from central banks, on both sides of the pond, failed to help the UK index break from its fortnight sideways channel, it was once again down to the highly watched US monthly employment report to kick markets into life. Non-Farm Payrolls (NFP) additions of 165K in April may only be in-line with the 12-month average (168K), however, it beat consensus of 150K and was much better than Wednesday’s warm-up ADPEmployment change (119K v 150K est). More importantly, Feb and March were revised upwards quite significantly (+114K) and the drop in unemployment rate (7.5% from 7.6%) was not at the expense of a fall in participation rate, as has been the case in recent months, with people giving up looking for work.

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Today’s report suggests some momentum in the US labour market, something the US Federal Reserve is monitoring closely and basing the scale and duration its interest-rate lowering QE intervention on. The world’s #1 economy may not quite be back to a regular +250K figure, but the signs of life it is showing via a lower unemployment rate, despite huge cuts in government spending, certainly aren’t hindering US indices (and certain continental bourses) from making new all-time highs. The report is good news for jobs, implying potential for growth and economic recovery.

Now that’s not to say the jobs market progress has not hinged on the Fed’s QE. And herein lies the conundrum. Too early an exit from QE could stifle the recovery. Evidence of a US recovery under its own steam may not be visible until the Fed begins to taper its asset purchases and macro data shows itself holds up. With the Fed this week expanding its policy statement to allow for both increases as well as decreases in QE, depending on how the economy is progressing, the suggestion is that the outlook is still extremely difficult and risks remain to the downside (remember last week’s GDP miss?).

NFP is also but one piece of data, from one geography. Yes, hiring is one of the best signals of business confidence and the US is the leading economy, but there is so much mixed data (in some cases contradictory) out there that the outlook is cloudier than a bad pint. The Eurozone continues to struggle under the weight of austerity, demanding less from the likes of China whose own growth we are unsure of in terms of propping up the rest of the world. This could lead the US to continuing to report volatile data. Good some months, less so others, seeing risk appetite keep swinging, influenced further by expectations regarding the actions of major central bankers in their quest to maintain growth.

So there you have it. Good news, balanced with some cautionary observations. Key with markets is considering all the facts – for and against. Whilst you need a view in order to trade, you also need to understand and appreciate the opposing arguments so as to better understand your own. Your opinion may indeed be factually right, but if the markets don’t agree it doesn’t matter. Trading only pays when you and the markets are aligned.

Enjoy a sunny long weekend.

For any commentary/analyst opinion on anything CFD/Spread Bet/financial markets-related, please contact research@accendomarkets.com

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Accendo Markets is an online trading services provider, offering CFDs, spread betting and forex to retail (private) clients. Accendo Markets was established in 2007 and has since gone on to win various awards including "2012 Winner of Best Execution only CFD provider" at City of London Wealth Management awards. Accendo Markets Ltd. is authorised and regulated by the Financial Services Authority (FSA). Register now for your FREE trading Guide Risk warning CFD trading, spread betting and Forex trading can result in losses exceeding your original deposit. Ensure you understand the risks, seek independent financial advice if necessary. Authorised and regulated by the Financial Services Authority.
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