Equities Higher After US Unemployment Data Miss, RBA Revises Inflation Lower, ASX SPI200 Futures Up 22 points

US equity markets finished higher on Friday after data showed employers took on the fewest workers in several months in April. Non-farm payrolls data showed just 160,000 jobs were added as opposed to the 200,000 forecast, reducing concerns of a June interest rate hike. Both the S&P500 and Nasdaq100 finished 0.32% and 0.48% higher respectively, while the US Dollar reversed early losses to close up 0.12%.

Elsewhere, the Canadian unemployment rate for April beat expectations of 7.2% with a reading of 7.1%. Despite the better than expected reading, the Canadian Dollar finished 0.44% weaker. European equities were also higher with the DAX30 & FTSE100 indexes up 0.18% and 0.14% respectively. Commodities were mixed, Copper unchanged (0.00%), Natural Gas (+1.20%), Iron Ore (-3.25%), WTI Crude (+0.77), Brent Crude (+0.80%), Spot Gold (+0.88%) and Spot Silver (0.74%).

A quarterly report by the Reserve Bank of Australia on Friday saw inflation forecasts revised lower, from a range of 2-3% to a range of 1-2% for 2016 and between 1.5% and 2.5% through to June 2018. Meanwhile economic growth forecasts remain at 2.5% to 3.5% for 2016 and unemployment expected to stay around 5.7%. The first chart below shows the immediate reaction in the Australia dollar, dropping around 1% and which should remain weaker moving forward, boosting support for the services sector. With inflation expected to remain low we can expect rates to also remain lower for longer, which will be positive for equities. The second chart below shows the reaction in the ASX200, which initially fell before rallying to finish 0.25% higher, meanwhile the market is set to open stronger this morning with ASX SPI200 futures up 22 points.

Data Releases:

·         Bank of Japan Monetary Policy Meeting Minutes (Apr) 9:50am AEST

·         Japanese Consumer Confidence (Apr) 3:00pm AEST

Source: Rivkin, Bloomberg, Updata

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This article was written by James Woods - Global Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3600.

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