U.S. and Canadian Jobs Day

October 7, 2011

Markets have absorbed yesterday’s ECB and Bank of England policy announcements and now look ahead to the release of North American September employment data.  Weak U.S. jobs numbers are anticipated.

The dollar shows overnight losses of 0.4% against sterling, 0.3% versus the Aussie dollar and 0.1% against the Swissie and kiwi.  The greenback has gained 0.3% against the loonie and 0.1% relative to the yen and euro.  The yuan continues its steady pattern since end-August.

Equities continued to rally strongly in Asia but are down somewhat in Europe.  Share prices rose 3.1% in Hong Kong and The Philippines, 2.9% in South Korea, 2.8% in India, 2.3% in Australia, 1.1% in Taiwan and New Zealand and 1.0% in Japan.  The Paris Cac, British Ftse, and German Dax have fallen 0.6%, 0.4%, and 0.3%.

Ten-year British gilt and Japanese JGB yields are two and one basis points higher.  The 10-year German bund edged down a basis point.

Oil prices fell 0.5% to $82.17 per barrel.  Gold is 0.3% higher at $1658.00 per ounce.

German industrial production dropped 1.0% in August.  Analysts had feared a bigger decline.  Factory output also fell by 1.0% but was 3.4% above the 2Q level in July-August combined.

Investors were more impressed with the Bank of England’s decision to increase asset buying by GBP 75 billion than by the ECB’s decision to only leave its interest rates as they were.

The Bank of Japan also opted for a wait-and-see stance.  By unanimous vote, the 0.0-0.1% rate target was retained.  A special lending program for firms hurt by the earthquake directly was extended six months to April 2012.  The central bank slightly upgraded its economic assessment, deleting any reference to residual supply-side post-quake constraints.  However, Governor Shirakawa stressed that downside external growth risks are being watched carefully.

Peru’s central bank also left its key 4.25% interest rate as is.

British producer output prices went up 0.3% last month and accelerated to a 12-month increase of 6.3%, most since October 2008, from 6.0% in the year to August.  Core PPI-O firmed to 3.8%.  Producer input prices jumped another 1.7% and by 17.5% on year.  Core PPI-I prices were 13.3% higher than in September 2010.  Both producer price indices exceeded expectations.

Canadian labor statistics surpassed expectations.  60.9 thousand jobs were created, twice as much as the net advance over the three prior months, and all of the increase in September involved full-time workers.  The jobless rate dipped to a 34-month low of 7.1% from 7.3% in August and 7.4% in June.  Canada’s IVEY-PMI settled back 0.7 points to 55.7, which remains a decent reading.

Australia’s purchasing managers index in construction weakened 2.1 points further to a 31-month low of 30.0 in September.

Japan’s index of leading economic indicators fell back 0.8 points to 103.8 in August even as the index of coincident indicators recovered another 0.3 points to 107.4.  Japanese reserves fell $17.9 billion last month, reversing 26.5% of the massive increase in August.

The French trade deficit narrowed 22% on month in August to EUR 4.97 billion, as exports rebounded 6.1%. 

The Czech trade surplus, on the other hand, plunged to CZK 1.75 billion in August from CZK 13.49 billion in July.  Czech industrial production increased 0.6% on month but by a less-than-forecast 5.9% on year in August.  Danish industrial output sank 4.3% in August but was 4.5% higher than a year earlier. Romanian industrial production rose 1.2% and 7.4% on year in August.  Norwegian industrial production posted increases in August of 3.6% from July and 6.1% from August 2010.

Street forecasts are calling for a 9.1% U.S. unemployment rate and just a 50K rise in non-farm payroll jobs.  Other scheduled U.S. data releases are wholesale inventories, consumer credit, and the monthly federal budget.  Treasury markets will close early today because of the 3-day Columbus Day holiday.  U.S. President Obama’s approval rating sank to a fresh low of 41% in October and received particularly poor marks for his handling of the economy, which most people believe to be back in recession.  Today was the final day of China’s Golden holidays for which Chinese markets were closed all week. 

Copyright 2011, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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