Markets responded to the news in kind with a notable leg higher seen through the latter half of domestic trade on Friday and continued to gain momentum through European trade with the DAX and CAC finishing a remarkable 4.33 and 4.75 percent higher. Likewise U.S markets recorded solid gains with the DOW and S&P rising 2.2 and 2.5 percent respectively. Judging by market response investors are clearly inspired by the latest European effort, however it remains to be seen if this represents the key inflection point we’ve been waiting for or simply a short-term sugar-high before the negativity sets in once again. Nevertheless, we’ve seen significant improvement from southern European debt markets with Spanish 10yr bond yields dropping below the 6.5 percent mark – an encouraging factor considering earlier in the week yields touched euro-era highs above the 7 percent region.
The Week ahead will see a number of critical data points to guide sentiment with Friday’s U.S non-farm payrolls the headline event on Friday. The U.S economy is expected to have created 90,000 jobs in June from a previous 69,000, with the official unemployment rate to remain unchanged at 8.2 percent. A slew of jobs-related precursors may sway market expectations in the lead up with ADP employment change, Challenger job cuts and weekly jobless claims due for release ahead of Friday’s non-farm payrolls.
Earlier in the week, interest rate decisions from Australia, Europe and the United Kingdom will be a primary focus amid the usual headline risk from the Euro-region. Following on from Friday, we’ve seen risk currencies open slightly higher with the Aussie breaking Friday’s high against the greenback and the Euro maintain it’s north bound trajectory, albeit in extremely illiquid conditions.