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Monday market minutes: Hope springs

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Wall Street reacted oddly to the stronger than forecast US jobs report for October – it rose instead of wobbling as many would have expected it to do.

The US economy created 261,000 new jobs last month, more than the 200,000 forecast and there were an extra 29,000 jobs in August and September. The unemployment rate rose to 3.7% from 3.5% but that’s still around what it was before the pandemic in early 2020.

The Dow jumped 401.97 points, or 1.26%, to close at 32,403.22. The S&P 500 added 1.36% to settle at 3,770.55, and the Nasdaq rose 1.28% to finish at 10,475.25.

That mean the major averages saw losses for the week. The Dow shed 1.4%, ending four weeks of gains. The S&P and Nasdaq fell 3.35% and 5.65%, respectively, to snap two-weeks of rises.

The rebound on Wall Street saw the overnight ASX futures market surge 92 points by the close early Saturday which should mean a very upbeat opening to the local market late today (Monday).

That was after Friday’s 34-point gain that helped Australian shares to rise by 1.6% for the week by Friday’s close – which saw a late hit from China’s bullish afternoon with a 20 point gain for the ASX 200 in the last 40 minutes.

Elsewhere Eurozone shares rose 1.6% and Japanese shares rose 0.3%. Chinese shares jumped 7.5% helped by talk of a relaxation in China’s zero Covid policy (See separate story).

Bond yields rose as did oil and copper prices and iron ore prices rose – all happening on Friday. While grain prices had spiked on news Russia was pulling out of the Ukrainian grain exporting deal, they then fell back as Russia reversed its decision. The $A rose 0.8% to $US64.66 US cents early Saturday. The $US was little changed

“You see kind of a tale of two cities today,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial who told CNBC. “I don’t think the market quite knows how to gauge this employment number versus what the Fed signalled on Wednesday.”

Friday also saw the Reserve Bank release its final Statement on Monetary Policy for the year after the 0.25% rate rise on Tuesday.

The Bank downgraded the outlook for economic growth, warning that more interest rate hikes will be necessary to bring down sky-high inflation even as it strives to avoid an outright recession.

It is forecasting economic growth to slow to 2% by the middle of next year (from 3.6% for 2021-22). By the middle of 2024, GDP growth is tipped to be down to just 1.4%.

Most of that slowdown will be due to a drop in household spending, which is currently growing around 6% but forecast to slow to just 1.3% by the end of 2023.

Inflation will peak at 8% by the end of this year. It is expected to still be at 4.7% by Christmas next year and then 3.2% by the end of 2024.

The RBA revised upwards its forecasts for unemployment, revealing it expects the jobless rate to be at 4% by mid-2024 from 3.5% now.

Wages are also expected to grow faster than had been previously forecast. By mid-2023, it has the wage price index growing at 3.7%, a 0.3 percentage point lift from what the RBA was forecasting in August.

But real wages are not forecast to happen until the closing months of 2024, if at all.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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