U.S. Jobs Day but That’s Been Overshadowed by Re-escalating Trade Tensions
April 6, 2018
Forecasters anticipate the U.S. March labor market data will show creation of almost 200K jobs, a further small dip in the unemployment rate, and a pickup of hourly wage earnings growth.
Share prices and commodity prices fell overnight in response to fresh concern that the U.S.-Sino trade dispute cannot be negotiated away. President Trump has threatened even broader tariffs on imported Chinese goods, and Beijing officials have promised to escalate their retaliation if that happens. The Chinese and Taiwanese markets remained closed for the Ching Ming Festival.
Japan’s Nikkei closed down 0.3%, as did the South Korean Kospi index. In European bourses thus far, equities are down 0.6% in Switzerland and Germany, 0.5% in France and Spain, 0.3% in the U.K. and 0.2% in Italy.
West Texas Intermediate crude oil slipped 0.7%. Gold is 0.1% softer.
Ten-year British gilt, German bund, and U.S. Treasury futures yields are a basis point lower.
A third theme in the market has been some weak reported data such as the euro area’s retail purchasing manager surveys, German industrial production, and Japanese household consumer expenditures.
Euroland’s retail PMI fell 2.2 points to a one-year low of 50.1, connoting stagnant consumer demand in March. The French retail PMI of 50.0 was also at a 12-month low, while Germany’s slipped 2.3 points to a 5-month trough of 51.5. Italy’s retail PMI plunged 5.7 points to 47.0, which was the first sub-50 reading since January 2015 and implied the fastest rate of contraction since July 2014.
Japanese February real household spending fell 1.5% on month in seasonally adjusted terms and posted a mere 0.1% 12-month rate of increase. Other released Japanese data today revealed
- A smaller JPY 189 billion customs trade surplus during the first twenty days of March compared to a surplus of 328 billion yen a year earlier. Import growth of 9.9% on year eclipsed export expansion of 5.8%.
- The index of leading economic indicators recovered to a 2-month high in February, but its diffusion index of 11.1 was the lowest since May 2014.
- Japanese international reserves rebounded $6.54 billion in March from a $6.79 billion drop in February. Reserves were just $13.9 billion greater than five years earlier in March 2013 just before the launch of quantitative stimulus as part of Abenomics.
- Real labor cash earnings in February were 0.5% below their year-earlier level.
German industrial production had been expected to post a marginal uptick in February but instead fell 1.6%. That halved its 12-month rate of increase to 2.6%. Moreover, average output in January-February was 0.2% lower than the 4Q17 mean. Production had risen 1.1% last summer and another 0.9% in the final quarter of 2017.
Germany’s construction purchasing managers index sank 5.7 points to a 44-month low of 47.0 in the unusually cold month of March. An 82-month high of 59.8 had been recorded as recently in January.
Hong Kong’s private purchasing managers index dropped 1.1 points to a 5-month low of 50.6.
British unit labor costs climbed 2.1% on year in the final quarter of 2017 compared to increases of 1.4% in the third quarter and 2.6% in the final quarter of 2016.
Mexican consumer confidence dipped in March to a reading of 84.5 from 85.0 the month before.
The French trade deficit narrowed 4.3% to EUR 5.2 billion in February, while the current account deficit stayed at EUR 2.0 billion.
In the 12 months to February, industrial production rose 3.1% in Spain, 4.1% in Hungary, 2.7% in the Czech Republic and 2.1% in Denmark.
On-year growth in Romanian GDP during the final quarter of 2017 got revised a bit lower to 6.8% and was also less than the 8.5% pace in the third quarter.
Austrian wholesale price inflation accelerated to 2.4% in March from 2.1% in February.
U.S. and Canadian labor statistics will be released shortly. Canadian housing starts and U.S. consumer credit figures also arrive today.
Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Euroland retail PMI, French current account, German industrial production, Japanese real household spending, U.S.-Chinese trade dispute