Australian construction index on the slide

Share Markets:

US markets were significantly weaker on Friday night as a solid jobs report brought the possibility of higher US interest rates to the fore.

The Dow fell 1.5%, the S&P500 was down 1.4% and the Nasdaq moved 1.1% lower.

In Europe, markets reacted to the upcoming expansion of quantitative easing and to the ongoing dramas surrounding aid to Greece.

The Dax rose 0.4% but the FTSE was down 0.7%. In France, the CAC40 was flat.

Interest Rates: 

On the back of a firm labour market report, US government long bond yields rose 13 basis points to 2.24%.

Two year yields rose 8 basis points to 0.72%. In Australia, where economic activity is modest and interest rates have trended lower, there was little movement on Friday with three year bond yields slipping one basis point to 1.92%.

Foreign Exchange:

The US dollar surged to an 11 year high, outperforming all the majors.

EUR conversely plunged to an 11-year low.  AUD rose ahead of the US payrolls result but then fell. The NZD also declined against the USD.

Commodities:

Fear of higher US interest rates sent the price of gold to a three month low.

The precious metal now sits well below US$1200 per ounce. The price of copper fell as Chinese imports weakened while the price of oil declined, in part due to a firmer US dollar.

Australia: 

The performance of construction index fell to 43.9 in February, from 45.9 in January. 

New orders slumped 6.9 points to 38.7, suggesting the index could move lower in coming months.

China: 

Chinese trade data can be volatile. In the year to February, Chinese exports rose 48.9% compared to a 3.2% decline in the year to January.

This month's data was influenced by the timing of the lunar New Year holiday.

If the months of January and February are combined, export growth comes in at an annual pace of 15%.

This, still firm figure, reflects growing demand by the United States. Chinese imports fell 20.1% in the year to February, again influenced by holidays but also by weaker commodity prices and slower demand.

Europe:

The Eurozone reported growth of 0.3% in its combined GDP in the December quarter of 2014.

This brought annual GDP growth up to 0.9%. While not especially robust, it was at least positive. The European economy contracted during 2013 but expanded on an annual basis throughout 2014.

Industrial production in Germany rose 0.6% in January to be up 0.9% over the year. The rise was the fifth straight month of gains.

United States:

US non-farm payrolls rose 295k in February compared with 239k in January.

The market had only been expecting growth of 235k.

The US unemployment rate improved from 5.7% to 5.5%, although earnings remained soft rising only 0.1% compared to 0.5% in January.

The participation rate slipped from 62.9% to 62.8%.

Part of the decline in the US unemployment rate over the past few years has been due to a trend decline in its participation rate.



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