Waiting for Friday’s U.S. Jobs Report

October 6, 2016

The dollar firmed 0.4% against the Swiss franc and Aussie dollar, 0.3% relative to sterling, 0.2% versus the euro, loonie and kiwi, and 0.1% against the yen. Chinese markets remain closed. Tomorrow’s jobs reports is not expected to dampen current speculation that the Fed will tighten by December and maybe even in November.

Oil’s upward trend has paused just below the $50 per barrel threshold on West Texas Intermediate. The firm dollar continues to weigh on demand for gold, which is trading at $1,270 per ounce.

Share prices in the Pacific Rim went up 0.9% in Hong Kong, 0.6% in Australia and South Korea, and 0.5% in Japan but fell 1.2% in New Zealand, 0.4% in India and 0.2% in Indonesia. European stock markets are down 0.4% in Switzerland, 0.3% in France, Spain and Italy, 0.2% in Germany and 0.1% in Great Britain. There’s concern that Prime Minister May is not handling Brexit negotiations well and may box the U.K. into a corner where it will be forced to settle for very disadvantageous terms to the financial services sector.

The ten-year German bund yield slipped three basis points to negative 0.4%, and the 10-year JGB is steady at negative 0.07%. The 10-year British gilt yield edged down a basis point to +0.80%.

Euroland’s retail purchasing managers index dropped 1.4 points to 49.6 in September, the third sub-50 reading in four months. The German and French components were at 2- and 5-month lows of 53.0 and 49.1. Italy’s retail PMI rose 1.7 points but remained well below the 50 no change level with a reading of just 45.0.

Germany’s construction PMI improved 0.8 points to a 4-month high of 52.4 in September.

German industrial orders climbed 1.0% in April, more than twice as much as anticipated, thanks mainly to gains of 4.3% in domestic demand for capital goods and a 2.9% increase in all orders for consumer goods. Both of those categories had fallen sharply in July. Orders were 2.1% higher than in August 2016, and the average July-August level exceeded the second-quarter mean by 0.6%.

In the final week before the mid-point of Japan’s fiscal year, stock and bond transactions with the rest of the world generated an inflow of 1.939 trillion yen, which almost reversed all of the prior week’s net outflow.

Australia’s trade deficit narrowed somewhat to A$ 2.01 billion in August from A$ 2.41 billion in July and A$ 3.18 billion in June.

Swiss consumer prices recorded another on-year drop in September, this time of 0.2% after a 0.1% August-to-August drop. The on-year slide had not been expected for September. Dutch consumer prices rose 0.1% on year last month.

The Swiss government’s autumn economic forecast revised projected growth this year up to 1.6% from 1.0% in the previous forecast but bumped the estimate for 2017 growth down 0.1 percentage point to 1.8%. CPI inflation next year is only expected to reach 0.2%.

In August, Czech retail sales increased 8.0% on year (5.6% if adjusted for the variation of working days), which was the best gain since February.

U.S. weekly jobless insurance claims data are due shortly. Canadian building permits and ECB minutes will be released today as well.

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


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