Market Attention Fixed on Today’s U.S. Jobs Report for August

September 2, 2016

The U.S. Labor Department will release August jobs data at 08:30 EDT.

  • In June and July, nonfarm payroll employment increased by 292K and 255K, respectively. Analysts look for an August figure of somewhat less than 200K. Keen interest will also be paid to the unemployment rate, which was 4.7% in May followed by 4.9% in June and July, as well as weekly hourly earnings, which in July rose 0.3% on month and 2.6% on year.
  • Fed officials have indicated lately that a rate hike soon is in play but that upcoming data will influence the exact timing. ¬†Markets currently attach about a one third probability to a rate hike at this month’s meeting.
  • Austria’s central bank president Nowotny, a member of the ECB Governing Council, drew a distinction in remarks overnight between the situation it faces and that in the United States, observing that the U.S. has faster growth, inflation that’s closer to target, and lower unemployment than Euroland. He also attributed low global interest rates to economic developments rather than central bank policies.
  • The Fed and Bank of Japan coincidentally hold their upcoming policy meetings on September 20-21. It’s possible that on the very same day, the BOJ could be augmenting policy stimulus as the Fed raises its federal funds target.

The dollar rose 0.4% overnight against the yen and shows tiny 0.1% gains relative to the euro, loonie, Australian dollar, Chinese yuan and sterling. The dollar dipped 0.1% against the kiwi and Swiss franc.

Japan’s Nikkei closed unchanged today. The 453 trillion yen size of the Bank of Japan’s balance sheet at the end of August was 2.2% higher than the end-July level and 25.3% greater than a year earlier. On-year growth in Japan’s monetary base slowed to 24.2% in August from 24.7% in July, 25.9% in 2Q, 28.8% in 1Q, 34.0% in 2015, and 43.2% in 2014.

Japanese consumer confidence rose to a reading of 42.0 in August, which is its highest level since 42.3 in January, from 41.3 in July.

European equities rose so far today by 1.0% in the U.K., 0.9% in France, 0.8% in Switzerland, 0.3% in Spain, 0.2% in Germany, and 0.1% in Italy and Greece.

Aside from Japan, stocks in the Pacific Rim closed down 0.8% in Australia, 0.5% in Singapore and 0.2% in Taiwan but up by 0.6% in Hong Kong, 0.4% in India and Indonesia, and 0.3% in South Korea.

The 10-year Treasury yield appears likely to open higher. 10-year sovereign debt yields rose three basis points in the U.K. and two bps in Japan but are flat in Germany.

Oil had fallen very sharply earlier this week, but bottom-fishing lifted West Texas Intermediate by 1.0% today to $43.59 per barrel ahead of the U.S. jobs report. Comex gold is 0.1% softer at $1,315.20 per ounce.

Producer prices in the euro area, which had posted back-to-back on-month advances of 0.6% in May and 0.8% in June, went up just 0.1% in July and were still a sizable 2.8% lower than a year earlier. Energy dropped 0.4% on month and 8.4% on year, while other producer prices collectively firmed 0.2% on month but fell 0.8% compared to July 2015 levels. The PPI in July was 0.8% higher than the 2Q average level.

Romanian producer prices fell 2.3% in the year to July, the same 12-month drop as in June.

Britain’s construction PMI rebounded 3.3 points to a 3-month high of 49.2 in August. It’s another sign that the post-Brexit shock has receded somewhat at least for the near term.

Revised Italian GDP data put second quarter over first quarter growth at zero and on-year growth at 0.8%, down from 1.1% in the two prior quarters.

Czech real GDP expanded 0.9% in the second quarter, but the on-year growth rate of 2.6% was its smallest in six quarters.

South Korean GDP climbed 0.8% in the second quarter and 3.3% on year and was associated with a 1.5% on-year price deflator.

Sweden’s second quarter current account surplus of SEK 36 billion was 37% smaller than the surplus in 1Q.

In addition to the U.S. monthly jobs report, the U.S. trade figures, the New York regional PMI (NAPM index), and factory orders will be released today. Canada reports trade and labor productivity data. Richmond Fed District President Lacker speaks publicly.

Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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