Resilient Mood Ahead of U.S. Jobs Report

June 3, 2016

Ahead of the May U.S. Labor Department jobs report, which analyst believe could be distorted, there is an upbeat mood that the U.S. economy can handle a Fed tightening easily and that commodities aren’t going to hit another air pocket.

  • The dollar is marking time, with no net change against the euro, yen, Swiss franc, sterling or yuan but drops of 0.6% relative to the kiwi, 0.2% versus the Aussie dollar and 0.1% against the loonie.
  • Equities climbed 0.8% in Australia, 0.5% in China, Japan and Singapore, and 0.4% in Indonesia and Taiwan.
  • In Europe, stocks show gains of 1.9% in Greece, 0.9% in London, 0.6% in Germany, 0.5% in France and 0.4% in Italy.
  • Copper advanced 2.2%.  West Texas Intermediate crude oil ($49.13) is fairly steady, and so is gold at $1,214.20 per ounce.
  • The ten-year German bund and Japanese JGB yields are a basis point firmer.

The main data so far today have been a slew of service-sector purchasing manager survey results from May.

  • Euroland’s composite PMI of 53.1 is at a 2-month high but suggests only 0.3% GDP growth in the second quarter.  The eurozone’s services PMI of 53.3 is at a 3-month high, but orders were soft.
  • Italy’s services PMI dipped under 50 to 49.8, a 14-month low, which dragged its composite PMI down to a 17-month low of 50.8.  Italy replaces France as Euroland’s weakest link.
  • France posted composite and service sector PMI scores of 50.9 and 51.6, best in 6 and 7 months, respectively.
  • Ireland topped the Ezone leader board with 2-month highs of 59.1 on the composite and 61.7 on services.
  • Germany’s and Spain’s composite PMIs were 54.5 and 54.8, each above April readings.  All the Eurozone PMIs reflected accelerating input price inflation.
  • Japan recorded a composite PMI score of 49.2, a 2-month high but the third sub-50 score in a row.  It’s services PMI increased 1.1 points to 50.4, a 3-month high.
  • China’s 50.5 composite PMI and 51.2 services PMI were 3-month lows.  Most components went down.
  • Russia’s composite PMI edged down 0.1 to a 2-month low of 51.2.
  • British composite and service PMI readings of 53.0 and 53.5 surpassed analyst expectations.
  • Sweden’s services PMI climbed 1.8 points to 54.4, a robust score.
  • India’s 51.0 services PMI and 50.9 composite PMI reading were at 6-month lows.
  • Australia’s Performance of Services index rose 1.8 points to a 3-month high of 51.5.
  • Hong Kong’s private sector PMI hit a 10-month high of 47.2 following an April reading of 45.3.
  • Singapore’s private PMI advanced 0.7 points to 50.1, a 2-month high.
  • Lebanon’s private PMI rose from a record low of 44.1 in April to 44.8 in May.
  • South Africa’s private PMI improved 2.3 points to 50.2, surpassing 50 for the first time in a year.

Retail sales volume in Euroland was flat in April compared to March and 0.4% lower than the first quarter average.

Chicago Fed President Charles Evans made dovish remarks, conceding the possibility of two rate hikes by yearend but saying his preference is for deferring such until core inflation climbs to 2%.

In Turkey, consumer prices in the year to May rose 6.6%, while producer prices went up 3.2%.

Swedish industrial production posted a lower 3.5% 12-month increase in April.

Japanese labor cash earnings slowed sharply to a 0.3% on-year increase in April from 1.5% in March.  This was a very disappointing piece of news.

Scheduled U.S. data today are employment, unemployment, wage growth, hours worked, the non-manufacturing PMI survey, the trade deficit, and factory orders.  Canada reports trade, labor productivity, and unit labor costs.

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

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