Equities Up but Little Change in Dollar Prior to U.S. Jobs Report Release
January 8, 2021
The biggest overnight dollar changes against a major currency are 0.3% dips relative to sterling and the Mexican peso, but the U.S. currency also firmed against the loonie and euro.
U.S. equity futures rallied further overnight. In the Pacific Rim, stocks rose 4.0% in South Korea, 2.4% in Japan, 3.0% in Singapore, 1.4% in India and 1.2% in Hong Kong. Share prices in Germany, France and Italy are up 0.7%, 0.5% and 0.4%.
The cost of a bitcoin topped $40,000, but the price of gold fell 1.3%. West Texas Intermediate crude oil moved above $51.00 per barrel with a 1.2% overnight advance.
The ten-year U.S. Treasury yield continued to adjust to the likely prospect of greater pandemic fiscal relief. A 1-basis point rise overnight brings this week’s cumulative advance to 18 basis points.
German industrial production growth of 0.9% in November beat expectations and marked the seventh straight monthly increase. Even so, production was still 3.8% lower than last February’s pre-pandemic level and 2.6% below the level in November 2019.
The EUR 21.3 billion German current account surplus in November was 9.4% smaller than a year earlier. The year-to-date surplus of EUR 208.5 billion is down from EUR 219.5 billion in the first 11 months of 2019. The seasonally adjusted German trade surplus averaged EUR 17.3 billion per month in October-November compared to a mean of EUR 19.3 billion in the final quarter of 2019.
France recorded its smallest current account deficit of 2020 in November, equal to EUR 1.413 billion. The EUR 3.6 billion trade deficit was an 8-month low. French industrial production fell in November (-0.9%) for the first time since April’s 20.7% tumble, and household spending (down 18.9%) posted an even larger monthly drop than occurred in either March or April during the first coronavirus wave.
Euroland unemployment slid 0.1 percentage point to 8.3% in November in spite of a 0.4 percentage point increase in the youth jobless rate. Italian unemployment dropped 0.6 percentage points to a 6-month low of 8.9%.
Spanish business sentiment improved marginally in December to a 9-month high.
Swedish industrial production climbed 1.5% on month and 0.8% on year in November. Factory output in Norway climbed 1.8% in November but also posted its first year-on-year decline (0.7%) since late 2019.
Switzerland’s 3.5% jobless rate last month was at a 47-month high, but when adjusted for seasonally variation it remained at November’s 3.4% level.
Japanese household spending declined 1.8% in November, breaking a string of three consecutive monthly increases. On-year growth in household spending declined from 1.9% in October to 1.1% in the next month.
Japan’s index of leading economic indicators in November was at the highest level since December 2018, but the index of coincident economic indicators edged down to a 2-month low. Japanese international reserved climbed by $10.1 billion in December.
Market reaction was muted in the first half hour after U.S. labor market statistics were reported this morning. There were surprises in both directions. Employment in December dropped 140k, the first monthly decline since April’s plunge of 21.3 million, but the October-November rise in jobs was revised upward by 135k. U.S. non-farm payroll employment at end-2020 was 9.8 million below its February high and 3.0 million less than the level President Trump inherited from his predecessor. On the other hand, the jobless rate of 6.7% in November did not tick higher in December as analysts had thought it might, and the broad unemployment plus under-employment rate fell another 0.3 percentage points to 11.7%. Also, on-year growth in average hourly earnings accelerated unexpectedly and by 0.7 percentage points to 5.1%.
Canada also experienced an increase in average hourly wages (5.4%) and a drop in jobs last month. At 62.6k, the decline in employment was more than twice as much as what analysts were anticipating.
Mexican consumer sentiment rose to a 9-month high in December. Brazilian industrial production went up for a seventh straight month in November, rising 1.2% compared to October and 2.8% from a year earlier.
Over 4.1k Americans died from Covid yesterday, a record daily high. Global deaths since the start of the pandemic exceed 1.9 million.
Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Euroland unemployment, German and French current account, U.S. jobless rate and nonfarm payroll employment