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#SaxoStrats
Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 02 July 2015 at 8:10 GMT

From the Floor: NFP will look good – so what?

  • The US NFP data is expected to show good results and will be in focus today
  • Greece is still watched closely, but no decision is expected before Monday
  • M&A activity is very high and a key factor for markets right now
  • Oil is under pressure due to surprisingly strong US inventory
from the floor
 
By Clemens Bomsdorf

Focus on NFP and Greece

Greece and the US are the countries investors will be looking at today. In most markets the US nonfarm payroll (NFP) data coming at 1230 GMT is in focus. However, since many American people will be off tomorrow due to July 4 holidays we might not see a reaction before next week when the Greek situation should also becomes clearer, says Kim Nydahl Grønlund from Saxo's FX desk.

“NFP is the key release today and another solid print is in sight,” says Mads Koefoed. ADP numbers yesterday were solid again with most job creation in small and medium sized companies. “That is good for the overall economy,” says Koefoed. 

The consensus for NFP is a slight decline in the unemployment rate to 5.4% from 5.5%. A positive NFP report hints at a rate hike by the Fed, but that might not be done as long as inflation is an issue.
 
NFP
 
In Europe this morning the meeting of the Swedish Central Bank is in focus. “The views from the different banks are very mixed and we should see a reaction in one way or the other,” says Nydahl Grønlund, adding that currently a 4 basis points cut is priced in.

Antitrust woes

In general markets will probably open pretty flat, expects Adam Seagrave  from the Saxo London desk. Currently there is a lot of focus on the macro events, but also M&A activity. 

The US antitrust lawsuit against Electrolux, which is attempting to acquire GE’s appliance unit, might send its share down strongly. Italian Mediaset received a 1.1 billion bid from Sky for one of its units and Tesco is discussing to sell its South Korean business for $6bn.

In Asia, where it is a light day with regard to data, shares started moderately higher except for China where another 5% decline could be seen. This happened despite the press writing about new market friendly measures as Christoffer Moltke Leth points out. 

USD drifted lower against the EUR despite relatively upbeat US data yesterday. “The market definitely remains cautious ahead of today’s NFP data and Greece,” says Moltke Leth. 

NZD extended the bearish trend today on problematic domestic economics including a slowdown in the Christchurch rebuild effort. Growth could decelerate to 2% this year. 

Australian trade balance marked the 14th deficit in a row and it was wider than expected, AUDUSD fell immediately after the release to asses a new low of 0.7630

Oil
 
Oil plunges

In oil we saw the biggest drop since April yesterday as the inventory report surprised showing an increase, not a decline. “If this turns out to be not only a single event there is concern that supply is going forward," says Ole Hansen, Saxo's head of Commodity Strategy. 

Important headlines are partly the same as yesterday. The Iran nuclear deadline will be expanded and US production is remaining close to a record. 

“We have seen the biggest quarterly withdrawal from USO in six years,” says Hansen. When it comes to oil prices we are not far from the 55 level which I am looking at in my Q3 update, but the way there to will not be a straight line. 58 can be reached on the way, according to Hansen.

“Gold is not showing much sign of panic, the strong job record is one of the worries. The biggest Chinese crash since 2008 could add some support,” he says, adding that we are getting into a potential buying area.

US farmer
No, it's NONfarm payroll, that is being watched today.
But, hey, please carry on harvesting. Photo: iStock

Clemens Bomsdorf is consulting editor at TradingFloor.com

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Editor’s note: From the Floor takes advantage of TradingFloor.com's unique real-time access to Saxo Bank’s various trading desks around the globe to put our community in touch with the developments that matter to their portfolios. 

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