A surprisingly large lift in October US non-farm payrolls and a higher rate of wages growth short-circuited US dollar weakness on Friday night. The currency and bond yields rose, and shares fell as the numbers appeared to re-iterate the Fed’s tightening stance. Although Asia Pacific futures are pointing to a weaker start for regional markets trading may remain cautious ahead of a full market calendar this week.
Leads from commodity markets are mixed. Gold maintained higher levels, possibly reflecting renewed inflation concerns based on accelerating wage growth. Copper prices responded to an improving growth outlook with a 3% surge, but oil prices fell despite US sanctions on Iranian crude. In other news the volatility of the British Pound is demanding forex trader’s attention as claim and counterclaim of a Brexit deal swirl.
Both China and Japan release important activity and trade data this week, kicking off today with the Caixin services PMI. The US mid-term election tomorrow night is a key risk factor for markets, with any change of control a threat to promised stimulatory programs.
The RBA will decide on interest rates tomorrow. No change is expected ahead of Friday’s Statement on Monetary Policy. Westpac this morning announced a full year profit of $8 billion, flat on last year. This is in line with expectations, but bearish housing market commentary from management may see WBC’s share price come under pressure today.