Monday Blues: Market Still Deciding

 |  Includes: FXA, FXB, FXE, FXY, UDN, UUP
by: Marc Chandler

The market does not appear to have yet decided what to make of not only the poor US jobs data, but also the initial reaction to it. The euro and sterling are consolidating the pre-weekend gains, with the former faring a bit better.

However, the dollar has had its losses extended against the Japanese yen, without the help of the Tokyo market, which was closed for a national holiday (Coming of Age Day), and the Australian and New Zealand dollars. The dollar was sold against the yen in early Asia down to almost JPY103.25 and there it has consolidated in the European morning, unable to resurface above JPY103.50.

There was some mixed data from Australia, but this did not stop the short-covering rally from being extended, with the Aussie moving above the $0.9000 for the first time in nearly a month. New home loans rose 1.1% in November, while the job ads fell for the third consecutive monthly decline in December. The December employment report is due out at midweek and is the most important report of the week.

Separately, we note that spot iron ore prices are at five month lows today. This speaks to the terms of trade pressure on Australia and, partly why the RBA wants a weaker currency. Cross rate adjustments against the euro and sterling have also been cited as factors helping lift the Aussie against the greenback.

The US dollar is recouping some of post-employment report losses against the emerging market currencies, but the MSCI Emerging Market equities are up about 0.8% so far today and even in Thailand, where demonstrators have shut the capital, the equity market rose 2.2%. European equities are higher as well, the Dow Jones Stoxx 600 (+0.3%), being led higher by financials (1%) and industrials (+0.5%).

European news flow has been light. The main economic news has been that with the 0.3% gain in November, Italy's industrial production rose for the third consecutive month. On a workday adjusted basis, it rose 1.4% from a year ago, which is the best in a little more than two years. The euro area reports aggregate industrial output figures tomorrow. The robust reports from Germany (1.9%), France (1.3%) underpins expectations for a strong figure (Bloomberg consensus is 1.4%).

Late Sunday, China's Regulatory Commission indicated it would strengthen the supervision of IPOs. Five firms quickly moved to postpone their planned offerings (fro Shenzhen) following a small drug makers postponing its IPO, saying the share sale was too large. Nevertheless, the Shanghai Composite finished lower (0.2%) for the fourth consecutive session. Separately, the Hong Kong Enterprise Index (H-shares) rose almost 0.2%., led by industrials and consumer goods. China's largest meat producer is preparing for an IPO shortly in HK.

There is a light calendar to start the week in North America. The main feature of the US session is a speech by the Fed's Lockhart (non-voter) on the economic outlook in Atlanta near midday. The Bank of Canada releases its senior loan officer survey.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.