Mar 30, 2015

    US jobs data to loom large over markets

    KEY employment data from the United States due out this week is expected to shed light on the American central bank's monetary tightening policy, and will likely keep the Singapore bourse trading within a narrow range ahead of its release.

    US non-farm payrolls for this month, due out on Good Friday, will be closely watched, particularly after last month's bumper jobs report, for more clues on the Federal Reserve's timing, frequency and magnitude of looming interest rate hikes.

    Last month's non-farm payrolls turned out to be far better than expected and raised the chances that the Fed may hike interest rates in June. But market participants now see that it is proceeding more slowly with interest rate increases, in the light of its unexpectedly dovish statement on March 18 downgrading US growth and inflation.

    Markets worldwide are seen trading lightly ahead of Friday's jobs report, because it comes on a day when the US equity market is closed and most world markets are also shut.

    US employers are expected to add 248,000 jobs this month, according to a Bloomberg survey of economists. Non-farm payrolls rose by 295,000 last month and the unemployment rate is expected to remain at 5.5 per cent, the lowest since 2008.

    "In light of the recent string of weak US data - retail sales, new home sales, manufacturing and GDP (gross domestic product) - non-farm payrolls could disappoint," Phillip Futures investment analyst Howie Lee said.

    "The Straits Times Index may take a breather this week, and trade in a range between 3,410 and 3,454 levels. We may see some selling pressure near Good Friday," he said. Local shares closed the week 1.1 per cent higher at 3,450.10.

    The latest US GDP data signalled slow fourth-quarter growth and reinforced views that the Fed may push back the launch of its rate hikes. The US economy grew at an annual rate of 2.2 per cent last quarter, compared with a forecast of 2.4 per cent.

    Remisier Alvin Yong said the weak data may be an indication of slow US growth momentum.

    However, he noted: "That we failed to break through the 3,454 resistance level with strong volume is a concern. A lot now depends on US employment data. If it disappoints, then that's bullish for the market. But if it outperforms expectations, then it's bearish for the market."

    Other data that could shed light on the health of the US employment sector is initial jobless claims to be released on Thursday. "If initial claims should decline, then non-farm payrolls should be good and the rate hike could be brought forward. But if initial claims rise, then that could indicate that the jobs report may fall short of expectations."

    Also closely watched will be other US economic indicators: the personal consumption expenditures index and personal income figures for last month due today; consumer confidence index due tomorrow and the ISM manufacturing index due on Wednesday.