Post-Jobs Report Rally Extended
August 8, 2016
World stocks, oil, and emerging market currencies rose in further reaction to Friday’s better-than-expected U.S. jobs data that showed a 255K increase in employment last month and marginally stronger wage growth.
Share prices advanced 2.4% in Japan, 1.7% in Hong Kong, 0.9% in China, 0.7% in Australia and South Korea, 0.6% in Taiwan and 1.5% in Singapore. Stocks are 1.0% higher so far today in Italy and Germany and have gained 0.8% in Spain.
The 10-year British gilt yield dropped 3 basis points. The Bank of England agreed last Thursday to a halving of its Bank Rate and to renewed quantitative stimulus.
The dollar strengthened 0.6% against the yen and 0.2% versus the Swiss franc. Sterling continues to find support marginally above $1.3000. The euro and yuan are unchanged. The ruble advance nearly 1%. Investors attach greater odds to a second fed funds hike by December but continue to assume a very gradual pace of rate normalization.
West Texas Intermediate crude oil climbed 1.5% to $42.41 per barrel. Industrial metals advanced too. But gold lost 0.6% to $1,336.60 per ounce.
Several Japanese economic indicators were released.
- Bank lending posted on-year growth of 2.1% in July, same as in the second quarter.
- Bankruptcies were 9.25% lower in July than a year earlier, their biggest slide since March.
- The economy watchers index printed at 45.1 in July, up from 41.2 and its best score in four months. The outlook economy watchers series reached a 5-month high.
- The seasonally adjusted current account surplus widened to JPY 1.648 trillion in June from JPY 1.415 trillion in May and was even a bit greater than April’s surplus of JPY 1.628 trillion. The unadjusted current account surplus of JPY 974 billion was 80% greater than the June 2015 surplus.
China’s trade surplus of $52.3 billion in July following $48.1 in June was its widest since January. Imports were 12.5% lower than a year earlier compared to a 12-month 8.4% drop in June. Exports fell 4.4% on year after a decline of 4.8% in June. Chinese reserves fell $4.1 billion in July to $3.201 trillion.
German industrial production bounced up 0.8% in June after dropping 0.9% in May. June production was only 0.5% greater than a year earlier, and the 2Q total was 1.0% lower than in the first quarter. A 2.7% on-month decline in energy mitigated a 1.5% increase in manufacturing.
The Sentix measure of investor sentiment toward the eurozone recovered 2.5 points to a score of 4.2 in August, still the second lowest result of 2016. The Sentix had plunged 8.2 points in July, reflecting the Brexit decision.
According to the Bank of France, manufacturing sentiment in France improved in July to a 3-month high, but sentiment in services was at a 3-month low. Monetary officials project a 0.3% rise in French GDP this quarter.
Swiss consumer prices fell 0.2% both on month and on year in July. On-year deflation in June had been -0.4%.
Greek consumer prices, on the other hand, recorded a larger on-year slide in July of 1.0%.
Ireland’s construction purchasing managers index improved to a 4-month high of 61.0 in July. The prior three monthly scores had each been below 60.
In the year to June, Danish and Turkish industrial production rose by 0.3% and 1.1%. Czech output managed a more robust gain of 3.9%.
Tomorrow marks the ninth anniversary of the start of the subprime mortgage loan financial crisis that triggered the worst post-WW2 global recession. The world economy is still feeling the shock of that event.
Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission.