Poor employment data last week from the U.S pulled down bourses.
Markets are reacting to fears of corporate profits being down due to the unbeneficial USD foreign exchange rates that companies have suffered this year. Add to this the poor unemployment data last week, and the result is that investors are acting bearish towards U.S equities.
USA30 [Dow 30] was down on Friday by 0.9%, USTECH100 [Nasdaq] also fell 0.9% and the USA500 [S&P500] was similarly down by 0.9%. The DollarIndex fell 1.2% in conjunction with weak equity markets.
Friday’s job reports, though enviable from Europe’s perspective, saw the fewest amount of jobs created in more than a year at 126,000. This goes against the underlining principle of the Federal Reserve’s economic plan which puts the health of the labour market as the first and foremost indicator of recovery. With the poor job creation figures that slowed even though wages grew, the FED is less likely now to raise the interest rate. On March 27, FED Chair Janet Yellen stated that while an interest rate hike would be warranted this year, the FED might be forced to delay as a result of weakening inflation pressures.
The impact of labour costs versus labour market growth is now working against companies as they soon enter the quarterly earnings session. The strength of the dollar has also worked against export prices and has seen many U.S firms struggling with high currency exchange rates. In the last year from April 2014, EURUSD has fallen from 1.39041 to 1.09816. Likewise USDJPY has gained over 58% in the last 3 years from 76.012 in January 2012 to 120.318 in April 2015.
The next few weeks of earnings previews will be essential in assessing the direction of U.S bourses.
MT4 chart: USA30 [Dow 30]
MT4 chart: USTECH100 [Nasdaq]
MT4 chart: USA500 [S&P500]
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