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It all boils down to one piece of data - the US non-farm payrolls.

Hold your breath. Market madness and mayhem could be a day away!

Peter Switzer
5 August 2016

By Peter Switzer

Normal people might be looking forward to the opening ceremony of the Rio Olympics but my Friday fix comes at 8:30am in the US (Eastern Time), when the non-farm payroll data is released. This is the must-watch, market-needle moving info that could be crucial to the lives of normal as well abnormal people like me.

The expert economists have made their guess and the key number is 180,000. If this happens, it’s a good number. If it’s higher, it’s a great number. And if it’s significantly lower, then it might be time to pull out the old US space age cliché of “Houston, we have a problem.”

(By the way, the real Apollo 13 astronaut said: “Houston, we have a problem, here.” However, Tom Hanks in the movie dropped the “here”. It’s another case of life imitating art!)

Back to life and this Friday number will actually become known at 10:30pm tonight. I will see it at 5am on Saturday morning, but the real impact for us will be on Monday and this figure could be responsible for market euphoria or market madness and mayhem!

And get this: in the crazy world of money, a really great jobs number could kill off the great run for stocks that we’ve seen since mid-February, or it could send stocks surging higher. The flipside is that a lousy result could be good for stocks and vice versa.

Did I say we’re talking about the crazy world of money?

Let me explain. I want a great jobs number to offset the disappointing economic growth number of last week. The Yanks wanted a 2.5% growth rate but it got only 1.2%, which made a lot of experts say: “Heck, this US economy is doing worse than we expected.”

This made Fed watchers predict that the US central bank would again delay its next interest rate rise. Now this has been good for stocks, with bad economic news delaying the rate rise and making stocks look more attractive. However, the fear has been lately that this liking of bad economic news because stocks go higher on ‘no rate rise’ expectations would eventually tell big market players that this blown out money supply trick from central banks is a failure.

If or when that happens, then we could see a big stock market crash, so this job number could be a prelude to something bad or something good.

I’m hoping for something good out of these job numbers but the craziness doesn’t end there because a really great job-creation revelation tonight could send stocks down!

I know it looks like the Yanks are damned, stock market-wise, if their job numbers are good and they’re damned if they’re not.

It looks like that but I reckon there could be a shock, short-term sell off, as some trader-types cope with the idea that the Fed might raise rates earlier rather than later, which could disturb their moneymaking speculations.

But on reflection, the overall view would become: “Heck, that growth number was misleading and the US economy is creating jobs so it must be growing.”

This would then create a U-turn for stocks and we should see a new surge higher. 

The US economy has to succeed so we can hope Europe and Japan can eventually do better and raise the overall growth rates of the global economy. And if our hopes that China will keep good growth rates up, then we can hope that eventually we will live in a more normal global economy and a more normal local economy — you know, an economy where confidence is high, where we worry about inflation, the jobless rate is falling and interest rates are rising!

Did I say the money world is crazy?

(P.S. Ahead of the job numbers, Wall Street was a boring flat finish but I don’t expect that tomorrow morning when I wake at 5am.)

(P.S.S The Poms cut interest rates overnight as the Bank of England worries about post-Brexit fallouts and UK and European stocks went higher. So at least the lower rates trick from central banks is still working over there.)

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