Awaiting U.S. September Jobs Data

October 8, 2021

Equity markets and the dollar stayed in place overnight, pending new clues from the U.S. Labor Dept report.

The dollar on balance is unchanged against the euro, loonie, Swiss franc and weighted DXY index. The dollar edged up 0.1% versus the yen, kiwi, and Aussie dollar and down 0.2% relative to the peso and 0.1% against sterling. A larger 0.5% advance occurred against the Turkish lira.

The Chinese equity market, which reopened after a week-long holiday closure, climbed 0.7%. Japan’s Nikkei and Hong Kong’s Hang Seng index went up 1.3% and 0.6%, and Australian share prices rose 0.9%. In Europe, however, the British, German, and Spanish equity markets have barely moved, and the French and Italian exchanges show losses of 0.3% and 0.2%. U.S. futures had edged 0.1% higher with less than a half-hour to go before the jobs report is released.

The U.S. senate approved a 2-month $480 billion extended rise in the debt ceiling, and the bill now goes to the House where passage is expected. The ten-year Treasury yield is a basis point firmer at 1.58%. Comparable German, British and Japanese yields are up 2, 5, and 1 basis points.

Among commodity prices, oil and gold have risen 0.7% and 0.2%.

Germany’s current account surplus narrowed to a 15-month low of EUR 11.8 billion in August. The seasonally adjusted merchandise trade surplus of EUR 13.0 billion was down from EUR 17.7 billion in July, a monthly average of EUR 16 billion in the first half of 2021 and EUR 14.8 billion per month in 2020. Exports fell 1.2% on month, while imports climbed 3.5%.

Japan’s seasonally adjusted trade balance swung from a JPY 341 billion surplus in July to an JPY 84 billion deficit in August, dragging down the current account surplus from JPY 1.41 trillion in July to JPY 1.04 trillion in August. In unadjusted terms, August’s JPY 1.666 trillion current account surplus was 20% smaller thanĀ  in the same month a year earlier.

China’s Caixin-compiled composite purchasing managers index recovered from a 16-month low of 47.2 in August to a 2-month high of 51.4 in September, but that level remained weaker than its longer term average. The services PMI had posted below the 50 breakeven level for only the first time since April 2020 during August but rose back to a 2-month high of 53.4 last month.

Japanese household spending recorded a considerably larger 3.9% slide in August and was 3.0% below its year earlier level. Japan’s economy watchers index, which exceeded the 50 level just once since mid-2018, rose from a 7-month low of 34.7 in August to a 2-month high of 42.1 in September.

Greek consumer price inflation accelerated 0.2 percentage points in September to a 116-month high of 2.2%. CPI inflation last month of 5.6% in Hungary represents a 107-month high and followed 4.9% in August.

In Brazil, CPI inflation rose to 10.25%, a 67-month high, in September from 9.68% in August and has more than doubled from 4.5% last December.

Czech retail sales in August rose 0.3% on month and matched July’s 5.1% 12-month rate of increase.

In Finland, industrial production rose 1.4% on month and 4.4% on year in August.

Indonesian consumer sentiment rose 18.2 index points to 95.5 in September as Covid restraints were relaxed. At 95.5, the index was still down considerably from 107.4 in June.

As expected, officials at the Reserve Bank of India left the repo and reverse repo rates unchanged at 4.0% and 3.35% after the latest bi-monthly policy review. These rates were last changed in May 2020. CPI inflation of 5.3% in India has settled back into the medium term target range of 2-4%. A released statement also left its reserve requirement ratio unchanged at 4% and “decided to continue with the accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward.”

Just in: U.S. non-farm payroll jobs grew 194k in September, less than 40% as much as forecast. The combined jobs growth in August-September of 560k was less than half as much as the sum of analyst predictions of 750k in August followed by 500k in September. The U.S. jobless rate fell another 0.4 percentage points to 4.8% and the U-6 alternative combined measure of un- and under-employment dropped 0.3 percentage points to 8.5%. However, labor market participation, which Fed Chairman Powell has often spoken about, unexpectedly eased back to 61.6%. Those who are working are putting in more hours per week to make up the slack, and average hourly earnings remained elevated with increases in September of 0.6% versus August and 4.6% compared to a year earlier. The report all in all was not as robust as hoped but probably not as much so as to stall Fed plans to commence asset purchase tapering before the end of 2021.

Canadian labor statistics for September were also released this morning and, in contrast to the U.S. data, surpassed expectations. Jobs in Canada rose 157k last month on top of a 90k increase in August. In addition, the jobless rates slid another 0.2 percentage points to 6.9%; the labor market participation rate climbed 0.4 percentage points to 65.5%; and average hourly wage earnings accelerated from a 12-month increase of 1.25% in August to 1.7% in September.

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

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