Marking Time Ahead of U.S. Monthly Jobs Report

June 4, 2021

Financial markets were marking time overnight.

The dollar was virtually unchanged but at multi-week highs, with no net movement against its DXY weighted index, a dip of 0.2% versus the yen and a 0.1% uptick relative to the euro.

The price of gold was flat, while that of WTI oil had firmed merely 0.2%.

U.S. stock futures were marginally mixed. In Asia, stocks closed down 0.4% in Japan and by 0.2% in China, South Korea and Hong Kong. The German Dax is unchanged, and the British Ftse is 0.1% softer. The ten-year Treasury yield is flat at 1.62%.

Retail sales in the euro area (-3.1% in April) coughed up March’s gain of 3.3%. The monthly drop was about three times greater than forecast, but against the comatose April 2020 figures, sales shot up by a record 25.9%.

Euroland’s construction purchasing managers index edged up 0.2 points to a 15-month high of 50.3 despite a drop of 1.4 points in the German component to a 3-month low of 44.8.

Irish GDP increased 7.8% on quarter and 11.8% on year in the first quarter. In that same period, Greek GDP advanced 4.4% relative to the prior quarter but posted a fifth consecutive year-on-year drop although such was less severe at -2.3%.

On-year Taiwanese real GDP growth in 1Q 2021 was revised upward by three-quarters of a percentage point to 8.92%. GDP has risen on quarter for three straight periods.

Real household spending in Japan ticked up unexpectedly by 0.1% in April, defying expectations of a 2% decline. Household spending was 13% greater than in April 2020.

British new car registrations, a gauge of sales increased sharply last month but remained 14.7% fewer than a year earlier.

The Reserve Bank of India as expected left the repo interest rate steady at 4.0%. Its been at that level since a 40-basis point cut in May 2020 culminated 140 basis points of reduction last year. India has been slammed lately by the Covid pandemic, and officials not only defended the need for a continuing accommodative policy stance but in today’s released statement augmented planned bond purchases next quarter. They also revised downward projected GDP growth next fiscal year by a percentage point to 9.5%.

Thailand and the Philippines reported CPI data today that gave credence to the view that global inflationary forces will settle back later this year. In Thailand, inflation fell to 2.44% in May from an 8-month high of 3.71% in April. Filipino CPI inflation held steady at 4.5% for a third straight month.

U.S. jobs growth under-performed analyst expectations for a second straight month in May, rising 559K, about 100k less than predicted. Also the combined unemployment and under-employment rate remained in double-digit territory at 10.2%. On the other hand, the jobless rate fell further than predicted to 5.8%, and average hourly earnings (up by 0.5% from April and 2.0% from a year earlier) exhibited more pressure than had been assumed. The combined level of jobs growth in March and April was revised upward by 27k, but the monthly average growth in jobs of 541k in March-May is only about half as much as one would like to see. Non-farm payroll employment remains 7.5 million below the pre-pandemic level in February 2020 and about 47 million short of the trendline assuming that jobs in this century had continued to expand at the pace during the final two decades of the 20th century.

In response to the U.S. jobs data, the dollar fell about 0.3% in the ensuing half hour, the 10-year Treasury yield dipped a basis point, and U.S. stock futures moved upward moderately.

Canadian May labor market statistics disappointed. Employment fell 68K, three times more than forecast, and the combined 269k drop in April-May erases most of March’s advance. Plus, Canadian unemployment rose 0.1 percentage point to 8.2% in May on top of April’s increase of 0.6 percentage points. Wages in Canada recorded an average 1.4% decline from a year earlier in May.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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