The ASX opened only slightly higher on Friday (6 September) as investors await the release of US jobs data for August, due out tonight (AEST).
The S&P/ASX 200 was up 9.5 points, or 0.12%, to 7,991.90 points at 10:41am AEST.
Danish investment bank Saxo says if the Nonfarm Payrolls report comes out stronger than expected, with job growth exceeding 165,000 and the unemployment rate falling to or below consensus at 4.2%, it is likely to be seen as a negative for those hoping for aggressive rate cuts.
“The unemployment rate is a key focus because the recent uptick is what triggered the ‘Sahm Rule’, defined as when the unemployment rate increases 0.5%-point from the previous 12-month low, which is a sign that the economy is moving towards a recession,” the Saxo strategy team says.
“The market is currently leaning towards expectations of a weakening labour market, which means that a better-than-expected jobs report could reduce the probability of large rate cuts this year.
“A disappointing jobs report, with growth coming significantly below 165k or the unemployment rate remaining elevated, would likely prompt the market to price in a 50bps rate cut in September with additional significant cuts expected before the year’s end.
“A weakening labour market would bolster the case for deeper rate cuts, potentially triggering a bond rally.”
Saxo adds that at the same time, equity markets could extend their selloff amid growing growth concerns.
The US dollar may come under further pressure amid heightened expectations of US Federal Reserve rate cuts, while gold could be supported as investors turn to safe-haven assets in response to heightened economic uncertainty, according to Saxo.
Six of the 11 sectors were in positive territory in the final trading session for the week. Consumer Discretionary was the best performing sector, gaining 0.49% and rebounding from its recent decline. The sector is off 2.14% for the past five days.
Materials was marginally higher, while energy edged back 0.79% and industrials was down 0.3%.
Emerald Resources (ASX:EMR) was a top mover on Friday, advancing 1.57% after yesterday announcing it has signed a binding term sheet with Golden Horse Minerals (TSX-V:GHML) to sell the company’s tenements located in Southern Cross, Western Australia.
Champion Iron (ASX:CIA) also moved higher, adding 1.64% to its share price in early trade.
The bottom performing stocks included coal companies Stanmore Resources (ASX:SMR) and Whitehaven Coal (ASX:WHC), which slid 3.89% and 2.87% respectively.
The index has lost 1.24% for the last five days, but sits 1.92% below its 52-week high.
The S&P/ASX200 is Australia’s leading share market index and contains the top 200 ASX-listed companies in terms of market capitalisation, and accounts for about 80% of the country’s equity market. The index is designed to measure the performance of the 200 largest index-eligible stocks listed on the ASX by float-adjusted market capitalisation
It is recognised as the institutional investable benchmark in the country.
Write to Angela East at Mining.com.au
Images: Saxo, ASX and iStock
