Market News

The dollar pared gains against the euro after New York Fed President William Dudley said not to be “overly optimistic about the growth outlook.”
Nonfarm payrolls rose by 216,000 in March and unemployment fell to a two-year low. The unemployment rate fell to 8.8 percent from 8.9 percent in February.
“We must not be overly optimistic about the growth outlook,” Dudley said. “A stronger recovery with more rapid progress toward our dual mandate objectives is what we have been seeking. This is welcome and not a reason to reverse course.”
The greenback dropped 5.5 percent against the euro in the first quarter as investors bet the European Central Bank will raise interest rates at the April 7 meeting and the Federal Reserve will fully carry out the $600 billion asset buying program through June.
Japan’s currency dropped to a 10- month low against the euro on speculation the Bank of Japan will lag behind its counterparts in raising interest rates. Currencies linked to U.S. growth, such as the Mexican peso and Canadian dollar, were the best performers against the dollar.
“We’re continuing to see the yen as one of the best ways of playing the positive reaction to this data,” said David Mann, the New York-based head of research in the Americas for Standard Chartered. “If you combine the data with the increasingly hawkish talk we’ve been getting recently from the Fed it could be raising expectations that Fed Chairman Ben S. Bernanke starts to be a little more upbeat in his comments which would be dollar-positive in the short term.”

The S&P 500 still has a few points to go before it will eclipse the 52-week high set in February. However, the Dow is now at a new bull market high. Bank of America (BAC 13.53, +0.20) and JPMorgan Chase (JPM 46.60, +0.50) have been primary drivers of the Dow's advance today. The two financial plays had lagged during most of the past week.

Oil prices are back up to $107.64 per barrel, which is just $0.20 shy of the two-year high that was set earlier this morning. The run up in oil prices has helped the energy sector put together a 0.8% gain.
Cabot Oil (COG 54.34, +1.37) and Pioneer Natural Resources (PXD 104.20 +2.32) are top performers in the energy space. Royal Dutch Shell (RDS.A 73.46, +0.60) isn't necessarily a leader, but the stock is still up solidly. The company announced that it has agreed to sell most of its downstream business in Chile to Quinenco for a total consideration of $614 million.

• Fed will keep close eye on infl expectations;
  
• Jobs data were encouraging;
  
• It's too soon to say what FOMC will or not do re exit;
  
• Core infl may rise but should not go much higher

HSBC suggests "that GDP growth will pick up from an estimated 2.5% in Q1 to 3.4% in Q2."

EUR/USD lifts back to $1.4186 after falling to $1.4060 amid strong Payrolls data. Euro expected to find supply at $1.4200 area.

HFE says March ISM fell to 61.2 but is still very robust. Headline is consistent with GDP growth of about 6% but a lagging small business sector means GDP is slower. "ISM details are slightly disappointing, because the key new orders index dropped to 63.3 from 68.0, and that's enough to signal the headline slipping to 58 or so in the next couple of months. This might be due to the earthquake in Japan; note the export orders index dropped to a three-month low."

EUR/USD  $1.4090, $1.4120, $1.4175, $1.4200
USD/JPY Y83.50, Y83.00, Y82.50, Y82.00
EUR/JPY Y116.25
EUR/GBP stg0.8800
USD/CHF Chf0.9200
AUD/USD $1.0300, $1.0220
EUR/AUD A$1.3850

U.S. stocks were poised to open the second quarter higher, following the government's stronger-than-expected jobs report - one of the most closely-watched economic indicators on Wall Street.
The report showed a gain of 216,000 jobs in March - easily topping forecasts. The unemployment rate dipped to 8.8% - its lowest level in two years.
Investors were also digesting a new offer for the NYSE (NYX, Fortune 500) from Nasdaq (NDAQ) and ICE (ICE).
Dow Jones industrial average (INDU), S&P 500 (SPX) and Nasdaq (COMP) futures were higher ahead of the opening bell.

Companies: Nasdaq and IntercontinentalExchange offered $42.50 a share, or $11.3 billion, for NYSE Euronext, topping the bid from rival Deutsche Boerse by nearly 19%. Shares of NYSE rose 10% in premarket trading to $39.10. Nasdaq's stock fell 4%, while shares of ICE slid 2.5%.
Also, major automakers including General Motors (GM), Ford (F, Fortune 500) and Toyota (TM) will release their monthly sales reports after the start of trade.
Economy: Also on tap for Friday morning, the Institute for Supply Management's March manufacturing index and the Commerce Department's February construction spending report will be released at 10 a.m.
Economists expect the ISM manufacturing index to remain steady at a reading of 61.4, while construction spending is expected to fall by 0.7%.
World markets: Asian markets ended the session mixed. The Shanghai Composite rose 1.3%, and the Hang Seng in Hong Kong added 1.2%. But Japan's Nikkei eased 0.5%, after a report showed auto sales in the nation plunged 37% in March.
European stocks rose in midday trading. Britain's FTSE 100 rose 1%, the DAX in Germany gained 1.2% and France's CAC 40 edged higher 0.8%.

HFE says +216k March payrolls incl 230K pvt jobs, "after a 240K Feb gain, making the best two months in exactly five years. Unemployment fell again".

Dollar gets a lift as NFP and unemployment both slightly top expectations. Currently EUR/USD challenges $1.4100 after exposing bids at $1.4120/25. Seems like euro may break the support at $1.4100.

Data released
07:45     Italy     PMI (March)    56.2    58.2    59.0
07:50     France     PMI (March)    55.4    56.6    55.7
07:55     Germany     PMI (March) seasonally adjusted    60.9    60.9    62.7
08:00     EU(17)     PMI (March)    57.5    57.7    59.0
08:30     UK     CIPS manufacturing index (March)    57.1    60.8    61.5
09:00     EU(17)     Unemployment (February)    9.9%    9.9%    9.9%

The yen headed for its longest losing streak against the dollar since July 2005 and the Swiss franc declined amid speculation that global growth will be robust, boosting demand for higher-yielding assets.
Japan’s currency dropped to a 10-month low against the euro on speculation the Bank of Japan will keep interest rates on hold in the aftermath of the March 11 earthquake, while the European Central Bank begins a round of increases.
“In general, world economic growth is quite strong,” said Lutz Karpowitz, a currency strategist at Commerzbank AG. “The negative impacts on Japan’s debt levels from the earthquake are beginning to hit the yen.”
Large Japanese manufacturers forecast on average that the yen will trade at 84.20 per dollar in the year through March 2012, according to the Bank of Japan’s Tankan survey, released today. Almost three-quarters of the responses to the survey came by March 11, the day the magnitude-9.0 earthquake and ensuing tsunami struck the country.
Federal Reserve Bank of Richmond President Jeffrey Lacker said yesterday the central bank should review whether to reduce its planned purchase of $600 billion in Treasuries, a program known as quantitative easing, because of improving economic data.

EUR/USD holds tight today within the $1.4140/80 range.

GBP/USD fell from $1.6080 to the lows around $1.6005. Later rate recovered to $1.6038.

USD/JPY rose to Y83.85 after it fell for short-time to Y83.30.

The main release comes at 1230GMT, when non-farm payrolls are expected to rise 192,000 in March following the weather-related movements in the previous two months, as indicators such as weekly jobless claims point to continued improvement. Private payrolls are seen up 195,000. The unemployment rate is forecast to stay at 8.9% after three straight declines. Hourly earnings are expected to post a 0.2% rise following the flat February reading and the 0.4% January gain.
US data continues at 1400GMT with the ISM data and also Construction Spending. The ISM manufacturing index is expected to rise slightly to a reading of 61.5 in March from 61.4 in February. Regional data already released suggest that the pace of growth accelerated. Construction spending is forecast to fall 0.3% in February after declines in the previous two months on sharp non-residential construction contraction. Weather continued to be a factor in the data
in February. In addition, housing starts fell sharply in February, a negative for residential construction in this report.

AUD/USD holds around day's high of $1.0359 iahead of the March US employment data. Talk of barriers at $1.0375 and $1.0400. Traders also await next Tuesday's RBA rate meeting. Some bids envisaged $1.0315/20. Aussie trades $1.0357/59.

Gold struggles to go higher while daily studies points for slow down. Initial res seen from yesterday's high and Mar 2 high at $1439.3/1440. Initial key support seen from the 21 & 5-DMAs at $1423.1/1425.4.

The yen fell on Friday to near a 10-month low against the euro and below its 200-day moving average versus the dollar on expectations for a strong U.S. jobs report, which could put further pressure on the currency.
Speculation was growing that non-farm payrolls data, due later on Friday, would be strong, reinforcing perceptions that U.S. economic recovery is on track and widening the yield differentials between dollar and yen assets further.
Analysts are forecasting that the U.S. economy will add 190,000 jobs in March. The data comes a day after hawkish comments from a U.S. Federal Reserve official gave traders more reason to think the Fed will raise interest rates before the Bank of Japan.
The dollar was helped after the Wall Street Journal reported that Minneapolis Federal Reserve President Narayana Kocherlakota signaled the Fed could raise interest rates by three quarters of a percentage point by the end of the year.
A recent series of hawkish comments by Fed officials have helped drive U.S. Treasury yields higher this week and caused the dollar's yield advantage over the yen to widen.
The BOJ will probably lag behind the Fed and the European Central Bank in raising interest rates, especially in the wake of the March 11 earthquake and tsunami that devastated Japan's northeast.
"A strong payrolls number would be reflected in the dollar/yen and it could rise to 84.50 in the short term," said Simon Derrick at Bank of New York Mellon. "We expect to see prolonged yen weakness due to loose monetary and fiscal policy in Japan."
The dollar rose above its 200-day moving average against the yen at 83.60 yen for the first time since June, a sign that the yen's uptrend may be coming to an end.
The dollar had tumbled to a post-World War Two record low of 76.25 yen in March, as the yen surged on the back of market speculation that Japanese investors may repatriate funds from abroad after the earthquake.
There has been little sign that such repatriation has taken place, and the yen later fell back after the Group of Seven intervened jointly to sell the yen on March 18. Japan conducted a total of 692.5 billion yen ($8.4 billion) in FX intervention in March, the Ministry of Finance said on Thursday.

European data for Friday includes the run of manufacturing PMIs for March, including the final readings fro France (0648GMT) and Germany (0653GMT) as well as the main EMU release (0658GMT) all of which are expected to confirm their preliminary releases. Further EMU data at 0900GMT is expected to see EMU unemployment remain at 9.9% for February. 
The main release comes at 1230GMT, when non-farm payrolls are expected to rise 192,000 in March following the weather-related movements in the previous two months, as indicators such as weekly jobless claims point to continued improvement. Private payrolls are seen up 195,000. The unemployment rate is forecast to stay at 8.9% after three straight declines. Hourly earnings are expected to post a 0.2% rise following the flat February reading and the 0.4% January gain.

US data continues at 1400GMT with the ISM data and also Construction Spending. The ISM manufacturing index is expected to rise slightly to a reading of 61.5 in March from 61.4 in February. Regional data already released suggest that the pace of growth accelerated. Construction spending is forecast to fall 0.3% in February after declines in the previous two months on sharp non-residential construction contraction. Weather continued to be a factor in the data
in February. In addition, housing starts fell sharply in February, a negative for residential construction in this report.