DAVID MORRISON<br />CFD MARKET STRATEGIST, GFT<br /><br />FRIDAY&rsquo;S non-farm payroll report was, on the face of it, a really positive piece of news to take us up to the end of the year. Although 11,000 jobs were lost in November, this was the lowest number of losses for two years. On top of that, there were hefty revisions to the last two months, which added a significant number of people back into the workforce.<br /><br />Last month the US unemployment rate rose to 10.2 per cent, shocking the market. But last Friday saw this fall back to 10 per cent. While one month&rsquo;s numbers do not make a trend, this was good news all round and was greeted enthusiastically.<br /><br />The market&rsquo;s reaction was interesting. As we&rsquo;d expect, equities jumped on the news, with US stock indices soaring over 1 per cent in minutes. The dollar also flew higher, which is what we should expect from positive economic data. After all, as a country&rsquo;s economy improves, so should investors&rsquo; confidence in future growth and their appetite to back the currency. Meanwhile, bonds slumped as yields shot up, giving more reason to hold the greenback.<br /><br />But although the rally in equities, bond yields and the dollar was in many ways rational, it flew against a trend that has been in place for many months. Bad economic news has been good news for risk assets, as it persuaded investors that rates would remain low and there would be pressure to extend stimulus programmes.<br /><br />Friday&rsquo;s improvement in the jobs data will give inflation hawks ammunition and could put pressure on the Fed to bring forward any plans for tightening. Even if the Fed remains unbowed and unmoved, the wider bond market may not. If this means that yields push higher and we have seen the low on the dollar, then what are the implications for stocks? The perceived wisdom is that investors have borrowed and sold the dollar to purchase higher-yielding risk assets. If this dollar carry-trade is as overcrowded as some analysts believe, then a rally in the dollar should lead to massive short-covering and a liquidation of risk assets.<br /><br />We saw hefty losses for precious metals on Friday, and then stock indices gave up a big proportion of their gains later in the session. The next few weeks will show if this is a major change in the trend.