Markets Looking Beyond Today’s Jobs Report
May 8, 2020
America’s imposed business shutdown will be reflected in today’s April jobs report, which analysts expect to show a 22 million dive in jobs and an unemployment rate that tops 15%. This will be the weakest labor market data since the Second World War, and ironically today marks the 75th anniversary of the end of fighting in Europe (V-E Day).
Stock markets around the world have nevertheless reacted positively to steps being taken in the United States, Australia and many other countries to reopen stores and other business establishments. These steps carry health risks but are deemed necessary to prevent a lot of irreversible damage to the economy.
With a what-me-worry attitude, share prices overnight rose 2.6% in Japan, 1.0% in Hong Kong, 0.9% in South Korea, .8% in China, 0.6% in India, and 0.5% in New Zealand and Taiwan. European stock markets so far are up 1.0% in Germany, 0.8% in France and 0.5% in Italy and Switzerland. Britain’s market is closed for the early spring bank holiday.
The dollar has lost marginal ground (0.2% against the Swiss franc, 0.3% relative to the Aussie dollar and 0.1% relative to the yen, euro, loonie, yuan and sterling. The greenback has dropped more significantly versus the kiwi, peso and a number of other emerging market currencies.
Oil and gold prices (down 0.1%) have been steadier than earlier this week.
The ten-year Treasury yield fell two basis points, while its German and Japanese counterparts remain steady.
There have been two central bank policy decisions. Officials at the Central Bank of Sri Lanka cut their deposit and lending rates by 50 basis points each to 5.5% and 6.5%. Earlier reductions were implemented this year of 50 basis points at end-January, 25 bps in mid-March and 25 bps in early April. The hope is that the combined 150 basis points of stimulus will help Sri Lanka’s economy weather the Covid-19 recession. Inflation will be subdued, and officials are dissatisfied with the only partial pass-through of previous easing to market lending rates.
At the Central Reserve Bank of Peru, which cut its interest rate twice recently by 100 basis points in March and again by a full percentage point in April, the key rate was left unchanged at its historic low of 0.25%. A release statement anticipates inflation falling to the central bank target floor as the economy endures recessionary conditions.
The Reserve Bank of Australia‘s quarterly Monetary Policy Statement was published overnight with a forecast dive of 10% in the first half of this year and a projected 6% negative growth rate for 2020 as a whole. Unemployment is seen cresting in double digits, and inflation is likely to fall temporarily below 0 percent.
Real household spending in Japan sank 4.0% in March and was 6% lower than a year earlier. This was the sixth straight month with an on-year decline, but February’s drop was just 0.3%.
Japan’s service sector purchasing managers index printed at 21.5 in April, breaking this data series previous record low that occurred at the time of the Tohoku tsunami in early 2011. The preliminary April estimate had been 22.8 and followed readings of 33.8 in March, 46.8 in February and 51.0 in January. Japan’s composite PMI last month fell to a record low of 25.8.
The on-year rise in Japanese labor cash earnings imploded to 0.1% in March from 0.7% in February and 1.2% in January.
Consumer confidence in Thailand had been sliding gradually but steadily lower for almost a year before tumbling 17.6 index points between February and April to its lowest level since the Asian debt crisis in 1998.
British consumer confidence in March was revised marginally higher to -33. That compares very unfavorably with a reading of minus 7 in February but is not quite as low at the record trough of -39 in July 2008.
Germany’s seasonally adjusted trade surplus lurched inward to EUR 12.8 billion in March from 21.4 billion euros in February, as exports plunged 11.8% on month and 7.9% on year. The current account surplus was EUR 24.4 billion versus EUR 30.9 billion a year earlier.
Spanish industrial production plunged 11.9% on month and 12.2% on year in March.
Dutch factory output posted its largest year-on-year decline in April (2.5%) since last June.
Ireland’s unemployment rate of 5.4% last month was the highest in 16 months.
Swedish household consumption dived 5.4% on month in March, its biggest drop since at least February 2000.
Greek consumer price inflation fell to minus 1.4% in April from zero percent in March and +0.9% at the start of this year.
Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Central Bank of Sri Lanka, Central Reserve Bank of Peru, German current account, U.S. jobs report
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