Markets take respite on U.S. jobs data

With battered global financial markets getting some respite from better than expected U.S. payroll numbers, which saw 117 thousand new jobs in July, Business RT spoke with Peter Westin, Chief Strategist at Aton Capital.

RT: What do you make of this jobs report?

PW:“Well it’s a bit of good news in what has been a really bad week.It is proving that the U.S. economy is still growing, but not more than that. Still I think people are worried about a recession, and I think what you are seeing in a market rebound is really investors clinging on to a little bit of good news in this kind of environment.So I don’t think we should read anything of it as of yet. It is too soon to say, and people will be watching the coming data very closely.The negative issues that were there yesterday are still there today, it is just that there is a little bit of gold in the lining if you want.”

RT: So this is just a brief respite?

PW:“Yes, this is what we call a relief rally.It can easily turn south again if you see something, lets say out of Spain and Italy, or anything else coming out of the U.S. – very easily turning downwards again.”

RT: What do you make of the performance of the Russian markets in the past couple of days?

PW:“Yes, I mean emerging markets have outperformed the developed market overall.The exception I guess has been Brazil.Russia has had the benefit of having the oil price having held up pretty well.It plunged 5% yesterday, but otherwise the fundamentals within the Russian economy are a fairly cheap market, although oil companies are cheap for a reason.That has probably been helping the Russian market quite a bit.But nevertheless we have seen Russian stocks take quite a beating yesterday, continuing today at the beginning and, you know, when we see a relief rally we can probably expect the developed markets to bounce back harder than the emerging markets, given that they fell more in the last couple of days.”

RT: What sectors in the Russian markets are the most interesting for investors?

PW:“Well it obviously depends on your view of the market.But my view is that we will probably see more bad news coming out, therefore we could see the markets going south further.And historically if you look at the last big declines the sectors that fell the least were what you can call the defensive sectors – mainly telecoms and consumers and to a lesser extent utilities.So those are the sectors that I will try and maintain exposure to if I have to be in Russia in this environment, and also gold companies.In the metals sector, which has obviously been quite hard hit, gold stands out as a fairly safe haven.On the other hand why not buy gold directly.”

RT: Do you think gold might breach $1700 per ounce next week?

PW:“Idon’t know, but I think that the downside risk is less in gold than in equities.”

RT: Next week are we expecting to see the same levels of volatility?

PW:“Well we have the weekly labour stat as always in the U.S. but I think it all depends on what comes out of Europe and the U.S.and mainly I think that the real concern right now is really Europe.Because Italy and Spain are, obviously the U.S. is too big to fail, but within Europe you can manage to bail out if you like Portugal, Greece, but if you are looking at economies the size of Spain and Italy then you have a really big problem on your hands.That is where people will be looking most probably next week.”

RT: Today when everything globally was in the red, the only indexes higher were Madrid and Milan.Why is that?

PW:“Yes you have seen the interest rates coming down slightly on the bonds, that has helped the market quite a bit.But I think that what people will be looking for is what the ECB and European Commission will do regarding raising further funds.Because right now, as it is, my view would be that it is not enough to sustain, if you would have a serious situation in Spain and Italy.It is anybody’s guess but it looks worrying to me.”