Investors Confident Today’s U.S. Jobs Report Will Be Solid

June 2, 2017

There’s also been an out-sized 3.1% drop in the price of West Texas Intermediate crude oil to $46.86 per barrel. Metal prices including gold are down as well.

The dollar and stocks continue to shrug off Trumpian meshugas. The dollar is unchanged against the euro, Swiss franc and loonie and 0.2% higher versus the yuan, breaking a weekly slide. The dollar also rose 0.2% relative to sterling, which is coping with its own political baggage. The dollar fell 0.3% vis-a-vis the kiwi and 0.1% against the Australian currency.

Following yesterday’s rally in U.S. stocks, Japan’s Nikkei climbed 1.6% overnight and moved back above 20,000. Equities also rose 1.2% in South Korea, 0.8% in Australia, 0.8% in New Zealand, 0.7% in Taiwan and 0.4% in India but just 0.2% in Hong Kong and 0.1% each in China, Indonesia and Singapore. Among European bourses, there have so far been rises today of 1.4% in Germany, 1.0% in Spain, 0.9% in France and Greece, 0.8% in Italy, but just 0.3% in Great Britain.

Domestic and foreign criticism of President Trump’s decision to withdraw the United States from the 2015 Paris agreement to counter climate change has been broad and scathing. Moving the United States into a class that previously only included Nicaragua and Syria has further solidified the Trump against the world persona and threatens to shut the United States out of all sorts of cooperative efforts.

British opinion polls show the Conservatives lead ahead of June 8 British parliamentary elections down to just 3 percentage points.

For now, investors are putting aside dismay regarding Donald Trump’s presidency because signs point to a stellar May jobs report from the U.S., which is due at 12:30 GMT. The ADP estimate of private employment growth, 253K, is 45% larger than that for April. U.S. non-farm payroll jobs increased 211K in April, marking the third advance of at least 200K in four months, and it was accompanied by a further dip of the unemployment rate to 4.4%. A deceleration of on-year average hourly wage growth to 2.5% meanwhile suggested that the U.S. economy is in a sweet spot of ample economic growth, historically low unemployment, but sufficiently low inflation that the Fed’s normalization of monetary policy can proceed steadily but without endangering the U.S. recovery. However worrisome Trump’s policies may seem, the risk to the U.S. economy doesn’t appear clear or present.

Ten-year British gilt and German bund yields are two and one basis points lower today, while Japan’s 10-year JGB yield is up a basis point.

In data reported overnight,

Euro zone producer prices were unchanged on month and 4.3% higher on year during April. That was the third straight month without a month-on-month increase in the PPI.

The British construction purchasing managers index leaped by an unexpected 2.9 points to a 17-month high of 56.0.

Greek GDP quarterly growth in 1Q got revised from a negative rate to +0.4%. GDP there also posted on-year growth of 0.4%. Revised Czech data still showed GDP in that economy posting a 2.9% advance in the year to 1Q17.

Sweden’s recorded a SEK 48 billion current account surplus last quarter. This was 9.4% smaller than a year earlier despite an unchanged trade surplus.

On-year growth in Japan’s monetary base continued to shrink last month, reaching 19.4% after 19.8% in April, 21.4% in the first quarter, 28.8% in the first quarter of 2016 and 34.0% in full-2015.

Japanese consumer confidence rebounded 0.4 points to 43.6, a two-month high, in May.

In Indonesia, which was closed for Pancasila Day on June 1, the manufacturing purchasing managers index was reported a day late, and it showed a 0.6-point drop below April’s ten-month high to a 2-month low of 50.6 in May. Indonesian consumer price data also were released today, showing total inflation up a tad to 4.33% in May but core CPI down 0.1 percentage point to 3.2%.

Australian new home sales, which had fallen 1.1% in March after a 0.2% uptick in February, advanced 0.8% in April.

South Korean GDP grew 2.9% between the first quarters of 2016 and 2017.

U.S. motor vehicle sales remained below 17 million last month and were 2.6% less than a year earlier. Bad car loans are a rising problem.

The Central Bank of Brazil cut its Selic interest rate by a full percentage point to 10.25% as was expected.

In addition to the Labor Department U.S. jobs report, trade figures and the New York region purchasing managers index known as the NAPM survey will be released today. Some Fed officials are speaking today, and Canada reports its trade balance and quarterly productivity growth.

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

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