Dollar Up but Stocks Down on Larger-than-Forecast Rise in U.S. Jobs

July 5, 2019

The dollar has recorded gains today ranging from 0.2% against the yuan and peso to 0.3% versus the loonie, 0.5% vis-a-vis the euro, 0.6% relative to the yen, Aussie dollar and sterling, 0.7% against the Swiss franc and 1.0% versus the kiwi.

U.S. nonfarm payroll employment jumped 224k in June, 40% more than projected. Labor participation rose 0.1 percentage point to 62.9%, and on-year average hourly earnings growth of 3.1% was not quite as much as one would hope.

With somewhat less confidence regarding a near-term Fed rate cut, share prices are down 0.5-0.6% in the U.S., Germany, France, and Spain. Equity prices closed up 0.2% in Japan and China, but India’s market contracted 1.0% as investors gave Prime Minister Modi’s budget a thumbs down.

The ten-year Treasury yield leaped nine basis points to 2.04%, and its German and British counterparts advanced by four basis points each.

The price of gold tumbled nearly 2% and is below the $1400 per troy ounce threshold. WTI oil dipped 0.2%.

Further evidence of the implosion of Germany’s economy came from May industrial orders in that economy, which tumbled 2.2% on month and 8.6% on year. The weakness that month was concentrated in a 4.3% slump in foreign orders. And although domestic orders for capital goods rebounded in May, the combined April-May level was 4.9% lower than the first-quarter mean.

Three Japanese economic indicators were released Friday:

  1. International reserves climbed $14.304 billion to $1.322 trillion in June.
  2. Real household spending posted the largest on-year increase (4.0%) in four years during May.
  3. The preliminary estimate of the index of leading economic indicators fell again in May, reaching its lowest level since December 2012. However, the index of coincident economic indicators advanced to a 7-month high, eliciting an upgrade in officials’ trend assessment from “worsening” as in March-April to “halting to fall.”

The British Halifax house price index slipped 0.3% on month in June but posted a higher 5.7% on-year rise in 2Q19. British unit labor costs in the first quarter of 2019 were 2.1% higher than a year earlier.

The French current account was in surplus in May (EUR 343 million) for the first time since December. A trade deficit that month of EUR 3.278 billion was the smallest since the final month of 2017.

Austrian wholesale prices recorded their largest on-year decline in June (1.6%) in 33 months.

Filipino CPI inflation of 2.7% in June was down four percentage points from 12-month increases last September-October and the lowest in 22 months.

Robust May industrial production data were reported for three European economies. Compared to a year earlier, IP went up 6.3% in Ireland, 8.7% in Hungary, and 10.5% in Denmark. But industrial production was 2.5% lower than a year earlier in Norway and just 1.4% higher in Spain. Spanish consumer confidence, on the other hand, improved to a 10-month high in June.

Unlike U.S. labor market data, Canada’s monthly labor force survey was not as good as hoped. The unemployment rate rose 0.1 percentage point to 5.5%, and the number of jobs contracted by 2.2k due to a 41.4k shrinkage of self-employment. Average hourly earnings in Canada surpassed the year-earlier level by 3.6%.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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