Optimistic Speculation With Risks

Friday started out quietly and saw the broad markets act in a cautious manner most of the day as the currencies and bourses held their respective grounds, this as investors awaited the results from the jobless numbers from the States. And when the Non Farm Employment Change and Unemployment Rate data was released it created a collective thud. Most investors didn’t know how to react. Confusion was created because the Non Farm numbers fell far short of expectations with only a result of 36k new jobs created, far short of the anticipated result of 138k.

However, the Unemployment Rate unexpected fell to 9.0%, which was better than the estimate of 9.5%. Investors were left scratching their heads as they could plainly see fewer jobs were added than forecasted, but apparently less people were officially unemployed. While these numbers will be debated further today, suffice it to say that the actual reason the Unemployment Rate dropped so dramatically was because many people filing unemployment claims for collection of the insurance - have simply given up and their numbers have ‘vanished’ from the lists of people actively pursuing work. Thus this jobless number was NOT a good one. Some government officials were quick to proclaim that the lack of job creation was a result of bad weather in December. If that is the case than the Non Farm numbers in March should show significant improvement. In other words the government and some analysts have bought themselves another month to try and increase investor and corporate confidence.

The USD did gain on the EUR as the day transpired, this as sentiment turned slightly negative. Today will prove an interesting trading fixture to see how investors given a weekend to look over data have interpreted the numbers on their own. Wall Street turned in a very tentative day of gains on Friday. Data will be very light from the U.S. today, the Germans will release Factory Orders and Europe will have the broad Sentix Investor Confidence reading.
However the day will belong to risk appetite as it does battle with cautious sentiment. The question is who will have the upper hand. Gold continues to trade in a rather consolidated mode near 1346.00 USD. Commodity prices in general slowed down last week, but they continue to get a lot of attention particularly in Crude Oil, the food resources, and the metals as they all trade near relative highs.

The EUR and GBP continue to trade under the weight of the European Sovereign Debt clouds, but increasingly the story is becoming one of central government versus national rights. The E.U. meetings in Brussels this weekend produced a working agreement between Germany and France which would grant stronger functions to the central E.U. government, but other nations were quick to renounce the proposal saying they would not give up their own tax formulas, nor would they concede to certain types of austerity measures. Among those that quickly sounded alarm were Belgium, the Netherlands, Ireland, and Poland among others.  Having said this, the EUR and GBP both continue to trade near the higher marks of their ranges against the Greenback as risk appetite continues to hold sway with many investors.

The JPY lost some ground to the USD, but not much in the overall scheme of things and the Japanese currency is still maintaining a strong ground. The AUD also is trading near highs against the USD even as Gold continues to show a little less luster foe the time being. The Asian markets are still seeing rather clumsy volume due to the holiday and only towards the middle of this week will volume become normal.

The broad markets showed a mildly positive run last week, essentially maintaining their gains in the global bourses. Investors have seemingly shrugged off concerns about political unrest in the Middle East. The question that will likely confront traders going into today is the same that has confounded many for the past month, what are the real growth prospects for the major economies and what are the risks? A taste for optimistic speculation has fueled the markets the past month and they may continue to see some backing.