Unemployment figures refreshes Australian market

15.21 AEDT, Thursday 8 November 2012

Unemployment figures refreshes Australian market

By Ben Taylor (Sales Trader, CMC Markets)

The Australian market has reversed part of its heavy losses on the back of a better than expected unemployment number and a turnaround in US futures. Investors bailed out of mining and energy plays today preferring safer plays like healthcare and staples.

Today’s better than expected Australian employment result has helped bear the burden in the equity market. The Aussie dollar also shot to 1.0430 on the news before drifting back towards 1.0410 as the Chinese market took the overnight news harder than us.

The market doesn't seem convinced that the pace of Australian job creation will continue but does believe the RBA will hold fire for the time being as the jobless rate stays on hold.

As Obama won a second term in office investors grappled with the idea of a Democrat-dominated Senate and Republican-held House of Representatives. Investors want answers on how the two parties can work together amid the upcoming fiscal cliff to avert a recession. Fitch rating agency has also warned that the government needs to get its act together fast or lose its AAA credit rating.

Whilst it is widely expected the Republicans will give way to accept new revenues, no changes are however expected between now and 1 January. We can therefore expect a long period of debate and negotiations as the parties fight it out.

The Obama win reinforced the market expectation of ongoing quantative easing from the Fed. This was seen last night in the US bond market where the 10 year fell 12bp. The flight into US bonds showed the expectation of a long period of quantative easing and increased fear of recession.
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