The global scenario in the last few weeks seems to have turned positive for equities the last few weeks with most central banks easing and now even more with the US non-payroll numbers coming in much better than expected.
Nick Parsons, Head of Markets Strategy of National Australia Bank said the jobs report was the best of all worlds for risk assets. There were enough jobs created to keep the hopes of keeping plenty of consumer demand alive but there wasn’t much pressure on wages, which makes investors think of a potential US Fed rate hike coming. “It was just what the markets needed,” he said.
Most major central banks around the world are in the easing mode but US Fed will be the only one poised to hike rates.However, Parsons said a hike is likely to come only by December 2016 and it would be similar to the one it "sneaked in" at the end of 2015. The Fed will hike not because it is concerned about inflationary pressures but more because it wants to signal that there is sufficient strength in the US economy to warrant a hike, he said.
According to Parsons, if Fed is able to hike then it will be able to keep asset markets at current levels, which they believe would be good for consumer confidence. “The Fed is more of an asset price targeter than inflation targeter,” said Parsons.
The market is now pricing-in 47 percent possibility of US Fed rate hike from 37 percent before the jobs data.
Taking about crude, which had gone from USD 30 per barrel to USD 55 per barrel and then again corrected, Parsons said there have been some predictable comments from OPEC members with regards to freeze of production but they just tend to wage a war of words and this kind of chatter may continue for some time, which in turn might put base for oil prices in the near-term.
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