Previous Day's Market Highlights
The first Friday of the month gives market participants their latest look at the health of the US labour market; with September's report being something of a mixed bag. At the top level, headline nonfarm payrolls fell short of expectations, showing that the US economy added 136,000 jobs last month, the slowest pace of job creation since May. However, despite the disappointing September number, jobs gains in July and August were upwardly revised by a net 45,000, resulting in the 3-month average now standing at 157,000. Nonetheless, the pace of hiring continues to slow, down from a monthly average of 223,000 last year, to just 161,000 so far this year. The slowdown in jobs growth now seems to be linked less to supply constraints, and more to a lack of demand, as evidenced in recent sentiment surveys, indicating that payrolls growth is likely to continue to slow in the months ahead, in line with the broader economy.
Turning to other areas of the report, average hourly earnings were also softer than expected, increasing at just 2.9% YoY, the slowest pace in a year. This further evidences that the market may not be as tight as first thought, while also casting doubt on the fundamentals underpinning the current strong pace of consumer spending, thus posing a further risk to growth going forward. Wages are unlikely to markedly pick up going forward, particularly if the slowdown in hiring is demand-driven. In contrast, unemployment unexpectedly fell to a fresh 50-year low at 3.5%, showing that the labour market is not falling apart, and is merely slowing down, though whether such a low rate can be sustained remains to be seen. This was further evidenced by the participation rate holding steady at 63.2%, the joint-highest level since February.
For markets, the jobs report had something for everyone. A softer than expected headline figure, along with poor wages, dented the dollar, which settled 0.15% lower, as expectations of a Fed rate cut later this month remained steady at around 75%, with an 'insurance' cut likely as the economy continues to lose momentum. Nonetheless, the report was not disastrous, thus didn't spark major risk-aversion, while the prospects of looser monetary policy helped to spark optimism in equity markets, resulting in the benchmark S&P 500 closing 1.4% higher. Treasury yields were also a touch higher after the report.
Elsewhere, away from payrolls, volatility was muted with no other major data releases or headlines. Sterling continued to strike a softer tone, dipping around 0.2% against both the dollar and euro, as Brexit-related uncertainties persisted. Price action was also relatively uninteresting for the euro, which settled unchanged against the dollar. Meanwhile, both the Aussie and Kiwi dollars gained around 0.3%, benefitting from some positive noises on US-China trade relations. The Canadian dollar also gained, adding 0.25% in an oil-linked move.
Away from FX, European equities closed out a tumultuous week with a solid gain, as the pan-continental Stoxx 600 closed 0.75% higher; US equities are covered above. Finally, oil prices settled higher, with global benchmark Brent and US WTI crude gaining more than 0.7% apiece.
|Currency Pairing||08:00 Today||Vs 08:00 Yesterday||Four-Week High||Four-Week Low||% Change|
Today's Market Highlights
The trading week begins with a quiet calendar, with little in the way of notable economic releases due. Today's data highlight will be Sentix investor confidence figures from the eurozone, expected to remain rooted firmly in pessimistic territory at -13.0 in October, though the release is not typically market-moving. With data lacking, focus should remain firmly fixed on geopolitical issues, namely any notable Brexit developments. With Parliament set to be prorogued from Tuesday, in preparation for next week's Queen's Speech, any last-minute Parliamentary manoeuvring will be eyed. Furthermore, sterling traders will remain glued to the progress of UK-EU negotiations, specifically whether significant progress is made ahead of the EU Summit on 17th October. Market participants will also be keeping a close eye on the progress of US-China trade talks, set to begin on Thursday.
Monetary policy will also remain in focus in the week ahead, with minutes from the FOMC's and ECB's latest policy decisions in focus. Investors will parse the minutes from these meetings for further insight into the policy decisions, along with looking for hints on the policy outlook. Remarks from a host of central bank speakers will also be in focus. Particular attention will be paid to three speeches from Fed Chair Powell (Mon, Tues and Weds) along with remarks from BoE Governor Carney (Tues) and a host of ECB policymakers throughout the week.
Meanwhile, this week's data calendar is relatively busy. A couple of US releases will be in focus; namely Thursday's CPI figures, expected to show the pace of price increases continuing to increase, along with Friday's preliminary consumer sentiment data from the University of Michigan. Meanwhile, monthly GDP data from the UK will be eyed for any further signs of the economy slowing, while Friday sees the release of labour market data from Canada.
Today's Economic Calendar
|9.30am||EUR||Sentix Investor Confidence (Oct)||-13.0||-11.1|
|18.00pm||USD||Fed Chair Powell Speech|