Markets To Celebrate US Unemployment

There you are! Once again the focus is gradually shifting to what and when will the US Federal Reserve be doing with its Quantitative Easing programme. While the world over economies will begin preparing (or rather have already begun preparing) for the tapering of the US bond buying exercise to begin, economic data points released yesterday speak a different type of a story. The interpretation of the US economic data is a very perplexing exercise. Robust numbers, by common sense, should be construed as positive sentiment builders. However, contrary to the above, a weaker reading on certain data points emerging from the US is actually helping build a positive sentiment in the markets globally.

The US Job creation data for the month of September is what we are talking about. A weaker than expected job creation in the US has come to reinforce the belief that the Fed will most likely prolong its bond buying into early next year. This means, the liquidity situation which is expected to come under a cloud with the Feds pulling out of the bond buying, is now at least some time away.

So, what is good, improving US economic fundamentals or a weaker situation out there? We could have a separate debate over this issue with lots of views coming in from various quarters. For now, the fact remains that globally markets will be riding the new found euphoria of a calmer and better liquidity situation.

This was already evident in the way the US markets behaved last evening. The benchmark indices in the US saw a record rise after the data was released. The Dow Jones Industrial Average rose almost half a percent to close at 15468 points, its highest levels since mid September. The S&P 500 continued with its positive move heading up 0.60% to close at 1755 points.

European markets too had been treading cautiously ahead of the release of the US jobs data. They ended mixed but with a solid positive bias expecting the US to continue with its note printing exercise well into 2014. The focus in Europe will now shift to the domestic side of things. The asset quality review scheduled to be held for which the criteria will be released today by the European Central Bank will be the key driver for the markets out there.

Asian markets are trading exactly as expected following the weak jobs data of the US. All without any exception are trading well in the green with Japan leading the way. Taiwan, Korea, Singapore and Indonesia are all up though the strength of the rise today is a little lower than what could have been expected. Indonesia and Singapore are among the best, trading up by more than half a percent even as we go into trade this morning.

So, to answer the most important question of the day – where do we begin and how do we trade today? There is a slim chance that we could go in any direction, other than what peer markets are taking. The Indian markets will take cues from overnight developments and open fairly in the positive zone today. With the US data out, there is little on the domestic front, other than the corporate results, to spur the markets. That of course excludes the loud noises around corporate governance issues that are presently getting harsher. For now take heart from a prolonged quantitative easing of the US which gives room to the Indian policy makers to get better prepared as and when it comes. Trade to profit from the new leeway that the US unemployed are offering you!