Article / 08 August 2016 at 7:00 GMT

Morning Markets: Nikkei leads equities charge

Former managing editor, / Saxo Bank



  • Germany: Industrial Production (0600 GMT) 
  • Eurozone: Sentix Investor Confidence Index (0830 GMT)
  • US: Labor Market Conditions Index (1400 GMT)

Some more disappointing Chinese data notwithstanding, that 255,000 nonfarm payrolls report for July helped Asian equities towards a one-year high and has the European indices ready to pounce as we head towards the open.

The Nikkei led the way, up approximately
2.5% in the runup to 0700 GMT, pulling the Hang Seng and Australia 200 along for the ride. The Shanghai Composite Index was also in positive territory but not quite able to match its peers after Chinese trade data for July showed a 4.4% on-year decline in exports and a 12.5% slide in imports.

Friday's data once again puts a rate hike in the US firmly back on the agenda with a move now priced at a 47% chance, from a 36% chance before the NFP release. September has shifted from an 18% to a 26% chance. The NFP
 has also awoken the dollar from its mid-summer slumber to push USDJPY back above 102.0, force GBPUSD below 131.0 and hold on to its post-NFP sub-1.11 incursion against the euro.

Gold predictably took the brunt of last week's monster number from the US for a near 2% fall before finding some stability at around the $1,330/oz mark. European bonds can also expect some pullback this morning as risk-on sentiment returns to the market with some conviction. Oil, meanwhile, resurfaced well above the $40/barrel mark as both key benchmarks pulled away from last week's sub-$40/b lows.

This is a week with much to absorb nevertheless data wise, including a raft of PPIs from the likes of China, Germany, the US to mention but a few. We'll have a clearer picture by the end of the week.

Market signals

Asian session

  • Asian equities showed strength in early trade, pacing Friday’s US upswing
  • Australia's job ads fell 0.8% in July, indicating a slowing market
  • The USD rose on the back of NFP jobs data which helped shift sentiment
  • Japanese shares led gains in the region, with Aussie and Korean bourses also up
  • Japan’s current account balance rose to a seasonally adjusted ¥1.65tln, up from ¥1.41tln 
  • WTI nudged $42/barrel, while nickel slipped in early Asian trade
  • Odds on the Fed raising rates by the end of this year rose to 47%
  • China's exports and imports fell more than expected in July
  • Exports fell 4.4% on-year, while imports fell 12.5% in US dollar terms

Forex ahead

  • The USD strengthened against the NZD and the Korean won
  • General USD strength prevailing after Friday's NFP

From the Floor

Green day. “Risky assets are bouncing on the back of Friday’s NFP,” says Moltke-Leth.

GBPrexit. ”In FX, we are seeing a record short position in sterling,” says Hansen.

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

German manufacturing is expecting a rise in this month's data, but not all is so rosy in the Eurozone, where sentiment remains pretty damp, says James Picerno.

Centre stage
There is much involving central banks in the week ahead with the Reserve Bank of New Zealand a key focus, writes Kay Van-Petersen in this week's Macro Monday.

NFP ho!
It's amazing what one set of figures can do and the strong nonfarm payrolls number in the US has stoked the USD and equities markets everywhere, says Saxo Capital Markets.


Friday's boom NFP number has helped spark equities across the globe. Photo: iStock

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