Dollar a Bit Softer and Equities Up Ahead of Labor Dept U.S. Report on Employment Situation
May 3, 2024
Fed Chairman Powell’s quelling of interest rate hike fears has alleviated investor concerns for now. It would probably take a significant overshoot of jobs and wage growth in today’s April data to remove that hopeful mood. Investors are anticipating a 240k rise in non-farm payrolls and marginally slower on-year wage growth of about 4.0%.
U.S. stock futures currently show overnight increases of 0.3% in the SPX, 0.8% in the DJIA, and 0.6% in the Nasdaq. In other stock markets this Friday, share prices rose 1.5% in Hong Kong and 0.6% in Australia but closed down 0.3% in China and 0.1% in Japan. Stock markets so far today in Germany, France and Great Britain shows 0.5-0.6% gains.
The biggest currency story of this week was suspected unilateral intervention by Japan’s Ministry of Finance in support of the yen, the amount of which is rumored to have been as much as $60 billion.The dollar fell 0.4% against the yen overnight and is now 4.5% below its 34-year high touched briefly early in the week. The dollar has also depreciated today by 0.4% against the Swiss franc, 0.2% relative to the euro and sterling and 0.1% versus the loonie.
The 10-year U.S. Treasury yield eased another 2 basis points overnight and is 12.5 basis points below last Wednesday’s intra-day high. 10-year sovereign debt yields dipped a basis point below Thursday closing levels in Germany, the U.K., France, Italy and Spain.
Bitcoin has taken a breather from recent volatility but remains much closer to $59000 than the psychological $60k level. WTI oil has risen 0.3%, while gold is steady and just slightly above $2,300 per ounce.
As expected, officials at the Central Bank of Norway left their policy interest rate unchanged at 4.5%, its level since a 25-basis point hike this past December. With that move the rate had risen all the way from a pandemic low of zero percent sustained from May 2020 until September 2021 via hikes totaling 50 bps in 2021, 225 bps in 2022 and 175 bps last year. A statement from the central bank today observes a recent slowing in global disinflation that has persuaded other major central banks to plan a slower path of rate reductions and expresses concern that Norwegian krone depreciation against the robust dollar could boost import prices and elicit upward wage pressure in Norway. The statement leaves the direction of the next Norwegian interest rate undecided, although the baseline continues to suggest that 4.5% will likely be a peak:
We have not decided now when we will lower the policy rate. In the period to the monetary policy meeting in June, we will have more information on economic developments. We will also present new forecasts in June. The data so far could suggest that a tight monetary policy stance may be needed for somewhat longer than we envisaged in March.
Turkish consumer price inflation in April (69.8% after 68.5%) and producer price inflation (55.7% versus 51.5%) accelerated marginally further. Each had bottomed previously at 38.2% in June 2023 and 39.4% in October 2023, respectively.
Far beneath Turkish levels, consumer price inflation in Thailand printed at 0.2% last month, emerging in the black after six straight months of sub-zero percent readings.
Unemployment in the euro area was again 6.5% in March, its level since March 2023 other than a single-month reading of 6.6% last October. Joblessness peaked at 8.6% back in August and September of 2022, by comparison.
Turkey’s trade deficit narrowed to $30.24 billion in the first third of 2024 from $43.52 billion over the first four months of 2023.
Among the few April purchasing manager surveys reported today,
- Australia‘s revised composite and service sector readings of 53.0 and 53.6 were slightly below their preliminary readings and constitute two-month lows.
- Ireland‘s services survey depicts a much slower rate of expansion in April with a reading of 53.3 (a 3-month low) after 56.6 in the previous month. Ireland’s composite PMI consequently dropped to 50.4 from 53.2.
- The British composite and service sector PMI readings got revised up 0.1 point to 54.1 and 55.0. Each figures was at a one-year high.
- The private non-oil PMI in the United Arab Emirates dropped to an 8-month low of 55.3 during April.
The April U.S. labor market statistics underperformed market expectations by a considerable margin, igniting a powerful stock market rally that has the DOW futures up almost 500 points or 1.3% just short of the nine o’clock hour and the Nasdaq futures up 1.6%. The 10-year Treasury yield has fallen 7 additional basis points to 7.495%. Non-farm payroll employment growth of 175k was the smallest monthly gain in six months and 68k less than consensus forecasts, plus the jobs growth in February and March was revised downward by a combined 22k. The jobless rate rose unexpectedly and by 0.1 percentage point back to 3.9%, matching February’s 25-month high. Average hourly earnings rose by a less-than-forecast 0.2% on month, slowing their on-year advance to a 34-month low of 3.9%. The data all in all are consistent with the soft landing return to 2% inflation without further Fed interest rate hikes that officials are hoping to achieve.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British service sector purchasing managers index, Central Bank of Norway, Euroland jobless rate, Turkish CPI and PPI inflation
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