US stocks to climb on jobs recovery

• US and European equity futures push higher.

• April nonfarm payrolls report to take centre stage.

• Markets still occupied with pre-empting Fed’s eventual policy move.

• Gold breaks above key technical level amid calmer yields, softer dollar.

Asian markets are climbing on the back of Thursday’s gains for US benchmark indices, following fresh signs that the US economy is healing from the wounds inflicted by the pandemic.

The S&P 500 is now just 0.23% away from its record high, while the Dow Jones Industrial Average posted a fresh all-time high on Thursday. The Nasdaq 100 ended a four-day losing streak, though it remains about three per cent lower from its highest ever closing price recorded on 16 April.

At the time of writing, equity futures contracts are pointing to further gains for US and European stocks before the weekend arrives.

Nonfarm payrolls to validate risk-on sentiment

Yesterday, the US recorded its first sub-500k weekly jobless claims print since the pandemic forced lockdowns across the country. With more Americans re-entering the workforce, that should help bring the US economy further along the road into the post-pandemic era.

Such optimism has to be endorsed by today’s US nonfarm payrolls data, with markets forecasting that one million jobs were added in April. While anything above March’s print of 916,000 would still demonstrate an improvement in the US jobs market, a payrolls tally that’s higher than the expected one million figure could well trigger another wave of risk-taking across global markets.

Further down the road, investors will be monitoring how US consumer price pressures react to more slack being taken out of the jobs market. More importantly, markets want to know whether such inflation will persist once e base effects fade, which may force the Fed’s hands into adjusting its policy settings earlier than central bankers have conveyed to the markets so far. The Fed’s commitment to its ultra-accommodative stance is arguably the biggest theme in play at the moment, despite the concerted attempts by officials to play down any talk about a premature paring of its stimulus measures.

Gold breaches psychologically important mark

Spot gold has broken above the $1800 level for the first time since February and is set to register its biggest weekly gain of the year so far. The precious metal’s climb has been helped since April by stabilising Treasury yields, which in turn has led to a moderating US dollar, noting the inverse relationship between gold and the greenback. The metal is now up around eight per cent over the past two months, since it registered its year-to-date low on 8 March, and has broken above its 100-day simple moving average.

Real yields on 10-year Treasuries remain firmly in negative territory, while breakeven rates on the same tenor are now around their highest since 2013. Such conditions have enabled gold prices to pare its year-to-date losses, considering its trait as a zero-yielding asset.

In order for gold to push higher from current levels, spot prices must carve out an extended presence above $1800 in order to encourage more bulls to come off the sidelines, especially those who cling to the belief that the precious metal is a worthy hedge against faster inflation.