ASX to pop on Monday, but China and jobs will weigh on investors this week

The Australian market is set to open higher on Monday, with investors focused on jobs data, a raft of earning season results, and the resumption of Chinese trade after a week-long break.

ASX futures are pointing to a gain of 87 points, after US and European markets rallied strongly on Friday, boosted by financial and mining sectors.

The ASX is expected to open slightly weaker on Monday.
The ASX is expected to open slightly weaker on Monday. Photo: Jessica Shapiro

European banks, which have been heavily sold off in recent times, were up 5.5 per cent on Friday. JPMorgan Chase added 8.3 per cent in the US. An 11 per cent leap in oil boosted mining heavyweights such as Anglo American, BHP Billiton and Rio Tinto, which were trading more than 5 per cent higher.

Despite the Friday rally, global stocks finished the week in the red, and investors are warily anticipating a Chinese "catch-up" selloff as trade resumes after a week of Chinese Lunar New Year celebrations.

At home, jobs are the big ticket this week. Labour market figures are due for release on Thursday and analysts are hoping the positive trend from last year will bubble over into 2016, giving local investors some reassurance regarding the state of the Australian economy.

At the end of 2015, the labour market unexpectedly improved. The 129,000 spike in jobs for the fourth quarter was the largest quarterly rise ever and saw unemployment surprisingly drop to a two-year low of 5.8 per cent.


That being said, many question the validity of employment figures released by Australian Bureau of Statistics.

Scott Haslem, economist at UBS, pointed out that both the Treasury Secretary's parliamentary testimony and RBA governor Glenn Stevens said there were "technical issues" that may have made jobs "look a little better".

"The jobs boom may be overstated, but probably not by enough to move the RBA," Mr Haslem said over the weekend.

"We see jobs growth moderating in 2016, amid sub-trend GDP but ongoing decent housing and consumption. This sees unemployment rise only modestly to 6.2 per cent by end 2016."

RBA minutes due on Tuesday

The Reserve Bank of Australia's board minutes are released on Tuesday and investors will be poring over the language in a bid to decipher any change of heart in the bank's thinking, especially given the severe market volatility so far this year.

Glenn Stevens' comments last week showed the bank's surprise at recent volatility. Mr Stevens said "markets are dropping their bundle" and believes the "gloom and doom has been overdone".

Capital Economics said the RBA's minutes will probably show concern regarding market volatility, but doesn't think the bank will be convinced this market unrest will affect Australia's economy.

RBA assistant governor Malcolm Edey speaks to the Australian Shareholders Association on Thursday and is expected to discuss recent financial turmoil.

Some big Australian names are reporting earnings this week, including Amcor and Newcrest on Monday, National Australia Bank and CSL on Tuesday, ANZ and Woodside Petroleum on Wednesday, and Telstra and Santos on Friday.

Globally, despite US and European markets rallying on Friday, European stocks remain distinctly out of favour. As such, investors will be keeping an eye on European Central Bank president Mario Draghi's testimony before the European Union parliament's economic committee on Tuesday. Investors are hungry for a stronger signal on whether monetary stimulus will increase next month. The eurozone economy continued to grow by 0.3 per cent in the fourth quarter, but on an annualised basis growth slowed to 1.5 per cent from 1.6 per cent.

Oil is still bubbling at the back of investors minds and watchers will be looking for signs out of OPEC confirming a production deal to possibly limit output. Comments from the United Arab Emirates energy minister moved the price sharply higher on Friday.

"We haven't heard anything yet from Saudi Arabia but their lack of denial, which usually comes quickly after a misquote, leads investors to believe that they are also growing uncomfortable with the commodity price level," Kathy Lien, managing director at BK Asset Management, said over the weekend.