Awaiting U.S. Jobs Report and Clarification on U.S. Election Results

November 6, 2020

Prior to the release of the monthly U.S. labor market report, investors were taking recent stock market profits. U.S. futures had fallen about 1%, similar to losses of 1.1% in Germany and 0.9% in Japan, France and Spain.

No winner has been declared in the U.S. presidential race. Dem and Rep supporters are warring over whether to count all mailed-in ballots postmarked no later than Election Day. Biden has overtaken Trump in Georgia’s count, trails by about 18K in Pennsylvania, and holds a narrow lead in Nevada. There’s been no change in the congressional outlook overnight: Dems have a narrow House majority, and Reps are likely to retain a slim senate majority. A divided congress reduces the chances of a fiscal stimulus, which the Fed considers still pretty essential.

Covid news is dismaying. U.S. new cases leaped more than 120k in the past 24 hours, double the pace at the end of October. Deaths rose more than 1200 in that span. Europe is grappling with a second wave, and global deaths from the disease surpassed 8.5k in the past day.

The dollar overnight fell 0.5% against the Swiss franc, 0.4% relative to the euro, 0.2% versus the yen and to just over a 2-month low on a trade-weighted basis.

The price of West Texas Intermediate crude oil slumped 3.2% so far today, and gold has risen 0.4% to above $1,950 per ounce. That’s $90 per ounce more than at the close on October 29.

German industrial production rose in September by a less than expected 1.6% but still enough to reduced the twelve month rate of decline to a 7-month low of 7.3%.

Spanish industrial production grew 0.8% in September but was 3.4% lower than in September 2019.

Norwegian industrial production dropped back 1.7% in September, trimming its on-year advance to a 3-month low of 6.3%.

Czech industrial production climbed 4.1% in September and bounced back by an average 22.6% in the third quarter but still recorded a 3.9% drop between the third quarter of 2019 and 3Q20.

Italian retail sales dropped 0.8% in September but exceeded year-earlier levels for the second month in a row with a 1.3% rise on such a basis.

In Japan, household spending rose 3.8% in September, which was almost twice expectations, yet managed to record the greatest on-year drop (10.2%) in four months. Labor cash earnings, a gauge of wages, in September were 0.9% lower than a year earlier.

Great Britain’s Halifax house price index rose 0.3% last month and recorded the biggest year-on-year advance (7.5%) since the middle of 2016.

Brazilian consumer prices posted their biggest monthly advance since January in October (0.9%), which lifted the 12-month rate of increase to an 8-month high of 3.9%. CPI inflation had bottomed in May at 1.9%.

The Reserve Bank of Australia’s quarterly Monetary Policy Statement out today throws cold water on the possibility of adopting a negative short-term  interest rate. The key rate was sliced by 15 basis points earlier this week to a record low of 0.10%.

The monthly U.S. labor market situation data were mixed. A 638k rise of non-farm payroll jobs last month was smaller than in September and less than half August’s increase. However, the jobless rate produced to wider surprise, dropping a whole percentage point to 6.9%. That’s also down from 10.2% as recently as July. Labor market participation increased 0.3 percentage points to 61.7% in October, but average hourly earnings posted a month-on-month uptick of only 0.1% for the second straight month.

The monthly Canadian labor force survey showed a smaller-than-forecast 0.1 percentage point decline in unemployment to 8.9% in October and a smaller-than-expected 83.6k advance in jobs after such had risen 378k in September.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.


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