“It’s a key week -- a lot of macro data,” says Saxo Bank’s head of equities strategy, Peter Garnry. “We’ll end the week with the big one, the [US] nonfarm payrolls.”

Economists estimate on average that the US economy added 185,000 nonfarm payrolls in April after a surprising slump to just 98,000 in March when the figure was less than half of what had been expected. But the new US jobs data will come only after the Fed's policymakers meet on Tuesday and Wednesday, with the markets expecting no change in rates from the Federal Open Market Committee.

News at the weekend that Congressional Republicans and Democrats had reached a $1 trillion spending deal to avoid a US government shutdown removed – at least temporarily – a big risk factor and dented gold prices.

“The focus is really on the US avoiding the government shutdown,” says Saxo Bank’s commodities strategy chief Ole Hansen. “That is taking some of the sting out of gold this morning, so the market is drifting lower.” 

Gold was finding support ahead of the $1,257-54/oz band, but could be challenged as safe-haven demand fades and the dollar rises, Hansen says. 

New PMI data from China at the weekend showed a slowdown in April. 

“We still expect the Chinese economy overall to be better than a year ago and even six months ago, but we had a pause here in April,” says Garnry. “And that is confirmed by other macro indicators we have had – that we are seeing a slight fatigue, and that also goes for the sentiment in the overall market.” 

“We hadn’t reached new highs in the S&P500 last week, so that will be the key battleground with the jobs data and earnings this week,” Garnry says. 

Earnings jamboree 

About a fifth of the companies that Saxo Bank tracks in its “equities universe” are due to report quarterly results this week, including reports from Apple on Tuesday and Facebook on Wednesday, among others, says Garnry. 

“Facebook will be very much anticipated,” he says. “Facebook has only missed estimates once since its IPO, so for five years – that’s 20 quarters – it only missed once in terms of estimates, and that was a very small miss, so the big question is whether this strong performance can continue. 

Facebook shares hit all-time highs last week. “So very high expectations going into the earnings release.” 

 (Read also Garnry’s preview of Apple and Facebook earnings on TradingFloor here.)

Other major companies reporting quarterly results this week include US biopharma firm Gilead Sciences on Tuesday, Denmark’s insulin producer Novo Nordisk on Wednesday, Anglo-Dutch oil group Royal-Dutch Shell and German technology conglomerate Siemens on Thursday. 

“Last week we saw a little bit more broad-based rally in equities, but still the two dominant sectors right now in the rally are definitely the technology and consumer discretionary sectors,” Garnry says. 

Oil prices are struggling against persistent signs of increasing production, including the reopening of Libya’s biggest oilfield.

“The US rig count rose for a 15th week, Libya’s output is rebounding,” says Hansen.  (Read also Hansen’s latest update on the COT data here.)

The EIA’s monthly data for February on Friday confirmed a production pick-up seen earlier in the weekly data. “So that production increase in the US looks pretty real at this stage, although we have seen it slow down for the past couple of weeks, so the impact is likely to be limited,” Hansen says.

In the futures market and speculative scene, oil market bulls are “starting to lose patience,” Hansen says, adding that last week brought a record reduction in gross long positions.

“That’s probably what the market needs in order to have some potential for upside at a later stage because the longs have been very resilient during the volatility of the past couple of months,” Hansen says.

Oil is still range-bound, hovering just above lows, but the market could be finding a base once again, so Hansen maintains a slightly bullish bias.

“Above $48/barrel, look for a reaction in WTI up towards $51-51.60/b” Hansen says.

Wheat prices jumped on a slow start to planting and a late-season blizzard in Kansas, while sugar prices look due for a correction after 12 straight weeks of selling, says Hansen.