Employment Change (APR) (1:30 GMT)
Unemployment Rate (APR) (1:30 GMT)
Expected: 12,500
Expected: 4.5%
Previous: 10,500
Previous: 4.5%
How Will The Markets React?
Though analysts and traders across the globe are gearing up for Wednesday?s FOMC rate decision; few expect any serious alterations to the central bank?s short statement - and certainly no change in rates themselves. Nevertheless, the market will certainly hold its breath for the event. However, the decision on US monetary policy does not mark the end of the week. There are other opportunities on the economic calendar that will quickly fill in for fundamental action in the Fed?s wake. Perhaps the greatest potential of any single indicator scheduled for the remainder of the week is built into the Australian employment numbers due at 1:30 GMT Thursday morning. According to the official consensus provided by Bloomberg, market participants will be looking for a 12,500 person boost in hiring through April - a number that should keep the jobless rate at a 31-year low 4.5 percent. Taken into a historical perspective, this outlook is relatively tepid. In the past few years, employment changes have frequently topped 40,000 and 50,000 new hires; so a considerable divergence may be needed to get the markets going. This is certainly a strong possibility. The Australian employment indicator - like the payroll figures in so many other countries - is notoriously volatile. Taking into account all the related data available that may offer a better guide for the employment number, there is certainly a bias towards a better-than-expected number. To begin with, job advertisements placed in newspapers and online last month rose 3.5 percent to a record 228,445. What?s more, there are clear signs that business investment accelerated through the month. One clue is found in the NAB business confidence survey which hit a one year high in April. Switching gears, should the employment report hit the ticker with a bullish surprise; the market will likely use the data to bolster dimming rate expectations. On the other hand, the all markets may rally on a bullish report or drop on a disappointment.
Bonds -10-Year Australian Government Bonds
Australian government bonds may be one of the securities that do not realize a standard reaction to Thursday morning?s employment data. The main reason to doubt the debt market?s reaction to the numbers is the price action in the 10-year note after this morning?s retail sales figure. Sales growth surged 1.8 percent in March, the biggest acceleration in 18 months. Initially, yields followed through with the data by climbing rapidly towards 5.900. However, the move couldn?t find the proper follow through; and traders ended up retracing more than 50 percent of the initial move. Now the employment data has two hurdles to overcome. First, the figure will need to print a change that is far removed from expectations. And then, it needs to be directly correlated to growth trends and monetary policy.
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FX - AUD/USD[/B]
After plummeting 200 points from highs near .8400, AUDUSD has swiftly recouped some of its losses as the pair has bounced from support with the help of stronger-than-expected Australian retail sales. Another bout of encouraging economic data could propel AUDUSD through .8300 as well, with the labor market anticipated to tighten once again in April. In fact, the Australian employment change is forecasted to rise 12,500 and keep the unemployment rate near thirty year lows of 4.5 percent. Since the Reserve Bank of Australia has been on hold for months, the country may be able to avoid some of the roadblocks that places like New Zealand have encountered now that rates are at record highs of 7.75 percent. On the other hand, a weaker than predicted employment change or an outright negative reading could underpin the case for an AUDUSD sell off towards .8200, as the data would imply that the economic scenario may slowly worsen.
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Equities - S&P/ASX 200 Index[/B]
Australian stocks fell from a record high as miners led declines on a drop in copper prices, bringing the S&P/ASX 200 Index down 0.5 percent to 6304.40 at the close in Sydney. Copper dropped 1.1 percent in New York, leading traders to sell off shares of BHP, the world’s biggest mining company. BHP ended the day down 1.2 percent to A$31.18 while Rio Tinto, the third-biggest minter, fell 1.8 percent to A$89.70. Qantas Airways slumped 3 percent to A$5.22 as it resumed trading for the first time since May 5 after a A$11.1 billion buyout offer led by Macquarie Bank Ltd. failed. On the flip side, Alumina Ltd., a partner with Alcoa - who made a $26.9 billion unsolicited offer for Canada’s Alcan - jumped 3.4 percent to A$7.62.
The employment change figure could lend a light boost to the S&P/ASX 200, as tight labor market conditions have kept consumers in the stores. The result is anticipated to rise 12,500 and keep the unemployment rate near thirty year lows of 4.5 percent, boding well for the economy at large. On the other hand, an extremely heated gain could raise fears that the Reserve Bank of Australia will consider hiking rates in order to cool domestic demand, which would only be exacerbated by a stronger labor market, and lead equity traders to send the S&P/ASX down through the 6300.00 level.
