Markets:
- Gold fell $29 to $1,948
- Daily WTI Oil + $1.85 to $71.93
- The Standard & Poor’s 500 rose 62 points to 4,289
- US 10-year yield rose 8.3 basis points to 3.69%
- The two-year US yield increased by 16 basis points, to 4.50%.
- The Australian dollar leads, and the Japanese yen lags
Non-Farm Payrolls beat consensus estimates for an unprecedented 14th time and beat them significantly however
Nonfarm payrolls beat consensus estimates for the unprecedented 14th time and beat them significantly. But the details told a different story and capped the dollar’s gains, at least initially. The unemployment rate jumped to 3.7% from 3.4%, wage growth was modest and the household survey showed a significant drop in employment, especially self-employment.
At first the dollar gave up almost all of its gains but a second dollar bid arrived later with higher yields. Front end yields have moved higher, and I think that represents a diminished possibility of excessive Fed error and a larger potential for a soft landing.
For months now, the bond market hasn’t been worried about inflation, but rather about pricing and growth rates. With the Fed ready to skip a meeting and possibly pause, there is less chance of a yo-yo in politics as they get too high and are forced to pause quickly. Or at least that’s one way of looking at the market that was hard to explain at the end of the month.
Dollar buying accelerated in the final hours of European trading as the euro, pound and yen fell sharply. Commodity currencies continued to keep pace with the US dollar as stocks – and value stocks in particular – jumped.
Again, this could be an indication that the markets are pricing in better global growth outcomes and besides the previous report was that China was planning some targeted real estate stimulus. Prior to the non-farm payroll report, the market was reluctant to respond to this report. For me, the details (such as lowering real estate commissions) are disappointing but they at least show that Beijing is paying attention to its disappointing economy.
Later in the day, the Canadian dollar found some bids on the side of oil as some OPEC reports about a possible 1mmbbl cut on Sunday did the rounds. The market’s reaction to oil was muted to those headlines and that is at least partly indicative of its price already.
I wish you a nice weekend.