Jobs data boost sentiment ahead of earnings

It’s been a positive start to the week so far, at least as far as global equity markets are concerned. Last week’s wobbles seem a distant memory as traders have jumped back in to hoover up stocks following a better-than-expected US Non-Farm Payroll release on Friday. The strong jobs number appears to have convinced many players that the US economic recovery is back on track and perfectly capable of weathering continued monetary tightening from the Federal Reserve. This is despite yet more evidence (through tepid wage growth) that inflation is still heading further away from the Fed’s 2% target.

Yet while some investors are not yet convinced that the US central bank is committed to further rate hikes, others are now looking to the ECB to follow suit. Monetary tightening is typically negative for equities as rising yields not only increase the costs of doing business but also increase the attractiveness of other investments. But traders seem happy to take advantage of a recent pull-back in stocks to load up once again. Now it’s all down to the second quarter earnings season to see whether that proves to be a clever move or not.