Markets Watching Three Developments

May 5, 2017

Financial markets this Friday, May 5, are watching three developments.

  1. The U.S. April jobs report. A rebound in employment growth from 98K in March is anticipated. The jobless rate in March was 4.5%, 0.2 percentage points less than in February, but average hourly wage earnings also ticked lower to a 2.7% on-year advance.
  2. Wednesday’s FOMC statement provided little fresh insight other than the revelation that the 1Q slowdown in GDP and consumption growth is considered temporary. There was no press conference, but six Fed officials have planned speeches today, including Chair Yellen and Vice Chair Fisher as well as Rosengren (Boston Fed president) Evans (Chicago), Bullard (St. Louis) and Williams (San Francisco).
  3. Round 2 of the French Presidential election is on Sunday. Centrist Macron is favored over Le Pen. At stake is the future of the EU. It ain’t over ’til it’s over.

The dollar had a good week. Overnight, the greenback gained 0.3% against the Swissie and Aussie dollar, 0.2% reliative to the loonie, yen and euro, and 0.1% versus the yuan but slipped 0.3% against the kiwi and 0.1% against sterling.

Japanese and South Korean markets were closed for Children’s Day. Dollar/yen is unchanged from Thursday’s close.

Share prices in the Pacific Rim fell 0.8% in Hong Kong,, 0.4% in New Zealand, and 0.3% in Australia, China and Singapore. Equities in India climbed 0.8%, and they are up by 1.6% in Italy, 1.0% in France, 0.9% in Spain, 0.8% in Germany, and 0.4% in Great Britain.

In contrast to recent swoons, the prices of gold and WTI oil ticked up 0.4% and 0.1% to $1,233.90 per ounce and $45.55 per barrel, respectively.

Ten-year German bund and British gilt yields slipped a basis point each.

The razor-thin passage of a bill yesterday by the U.S. House of Representatives repealing the Affordable Care Act doesn’t appear to signal its quick enactment into law. Senate leaders indicate that the matter there will be processed slowly.

The Reserve Bank of Australia’s quarterly Monetary Policy Statement  out today projects gradual rises in inflation and economic growth but low wage inflation and comfort with maintaining the Official Cash Rate at 1.50% for the time being. Recent data confirm that a growth slowdown in the middle quarters of 2016 was temporary. GDP is seen picking up to 2.75-3.75% by early 2018. Headline CPI will fluctuated in the 2-3% targeted range during the forecast period, and core inflation will rise to 2.0% by early 2018.

The National Bank of Romania Board left its key interest rate unchanged at 1.75% but reduced reserve requirements on foreign currency-denominated bank liabilities to 8% from 10%.

Germany’s construction PMI settled back to a 2-month low of 54.6 in April from a 13-month high of 56.4 in March.

Australia’s Performance of Construction index in April, 51.9, was above the March reading of 51.2 but below February’s score of 53.1.

The retail PMI readings in Euroland and Germany of 52.7 and 56.2 in April were each 21-month highs. France’s 51.8 was at a 3-month high, while Italy’s retail PMI jumped 3.2 points to a 5-month high of 48.3.

Hong Kong’s private sector purchasing managers index of 51.1 in April followed three straight sub-50 scores and was the highest reading in 38 months. The 50 level on these diffusion indices separates expansion from contraction.

Led by an 8+% increase in exports, on-year GDP growth in Indonesia accelerated to 5.01% last quarter from 4.94% in 4Q16.

Industrial production in the year to March rose 3.8% in Sweden, 0.4% in Spain, 2.9% in Ireland and 5.4% in Denmark. 

Canadian as well as U.S. monthly labor statistics will be reported within the hour. Canada’s IVEY-PMI data are also due today.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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