A strong September jobs report boosted the ASX 200 to a new high of 8355, confirming our target of 8500 for this year.
Labor Market
The Australian economy added a seasonally adjusted 64,100 jobs in September, according to the latest Labour Report, well above expectations of 25,000.
The unemployment rate remained steady at 4.1%.
The surge in jobs was absorbed by an increase in the participation rate to a robust 67.2%.
Aggregate hours worked also improved to 1,968 million in September, a 0.3% increase compared to the 0.2% average over the past 12 months.
Business
Strong labor conditions failed to inspire business confidence, with NAB business confidence (black below) declining to -6 pts in the third quarter.
Wage costs were the number#1 issue affecting business confidence:
The Mining industry (red below) recorded a sharp drop in confidence.
Stocks
The ASX 200 rallied through resistance at 8300, confirming our year-end target of 8500.
The ASX 200 rally was led by a strong surge in Financials, which is headed for a test of resistance at 8600.
The ASX 300 Metals & Mining Index remains tentative, weighed down by falling demand from China. Breach of support at 5600 would warn of another test of long-term support at 5000.
On the other hand, the All Ordinaries Gold Index is testing its July 2020 high at 9500. Breakout would offer a long-term target of 14500. The soaring gold price and falling energy costs have boosted margins, with diesel a substantial cost in extraction and transportation.
Conclusion
A strong jobs report boosted the ASX 200, which recorded a new high of 8355, confirming our target of 8500 for the year.
Strong employment growth suggests that the RBA is unlikely to cut interest rates before next year. Instead, the hawks will be keeping a beady eye on inflation.
Business confidence remains low, with Mining especially hard hit by sluggish demand from China.
The Financials sub-index is headed for a test of resistance at 8600. Breakout would offer a medium-term target of 9200. The All Ords Gold Index is also bullish, testing its 2020 high of 9500. Breakout would offer a long-term target of 14500. Metals & Mining, however, remain bearish.