Australia’s poor jobs print sends a shockwave through the markets whilst Germany’s inflation remains static
Without a doubt Australia’s jobless rate rising to 6 percent last month, the highest level seen since July 2003, cased quite a stir in the markets. Employment unexpectedly shrank by 3,700. Economists polled by Bloomberg had forecast up to a 15,000 gain. Australia’s currency, in a correlated move, fell 0.9 percent to 89.42 U.S. cents.
The rise in unemployment (to a decade high) has brought into question the economic miracle that has witnessed Australia becoming an export power house, particularly to Asia. The knock on affect, of investors temporarily doubting Australia’s continual and exponential growth, caused a selloff in many of the Asian indices. In New York the S&P 500 ended marginally lower yesterday, ending a four-day series of gains and setting a weaker tone for the Asia session.
Interest rates are now highly unlikely to rise before next year’s election, the Bank of England indicated on Wednesday, as it unveiled bullish GDP economic forecasts that have boosted George Osborne’s claim that the economic recovery is on track. Binning the previous forward guidance – linking interest rates to unemployment, Mark Carney, governor, said the Bank would no longer tie its future policy decisions to any particular economic indicator.
Turning our attention away from the economic powerhouse demon under to the European powerhouse Germany has revealed through its latest inflation figures that domestic inflation has been very stable over the last twelve month period and throughout 2013. At 1.3% the print is probably exactly where the governance at the Bundesbank wants the reading to be.
In other European news the UK’s RICS house price balance has fallen to 53%. It’s a standard diffusion index revealing that only just over half of UK based property surveyors saw prices increase in January versus 58% in December. However, before we get too ‘down on the data’ a quick reference to last year’s print reveals that the figure was zero. No surveyors questioned in Jan 2013 had seen a rise in prices in the preceding month.
German Consumer prices in January 2014: +1.3% on January 2013
Consumer prices in Germany rose by 1.3% in January 2014 compared with January 2013. In November 2013, the inflation rate as measured by the consumer price index had stood at +1.3%, too, while in December 2013 it had been +1.4%. The rise in prices thus remained low at the beginning of the year. Compared with December 2013, the consumer price index fell by 0.6% in January 2014. The Federal Statistical Office (Destatis) thus confirms its provisional overall results of 30 January 2014.
Australia Labour Force
Employment decreased to 11,466,900. Unemployment increased to 717,700. Unemployment rate increased less than 0.1 pts to 5.9%, based on unrounded estimates. Participation rate decreased 0.1 pts to 64.5%. Aggregate monthly hours worked increased to 1,622.4 million hours. SEASONALLY ADJUSTED ESTIMATES (MONTHLY CHANGE) Employment decreased 3,700 to 11,459,500. Full-time employment decreased 7,100 to 7,953,000 and part-time employment increased 3,400 to 3,506,500. Unemployment increased 16,600 (2.3%) to 728,600. The number of unemployed persons looking for full-time work increased 20,700 to 547,200.
Market snapshot at 10:00 am UK time
The MSCI Asia Pacific Index of shares dropped 0.9 percent in the overnight/early morning trading session. Japan’s Nikkei 225 (NKY) Stock Average closed 265.32 points, or 1.8 percent, lower after climbing 4.6 percent over the previous three days. The ASX 200 closed down 0.04%, the CSI 300 down 0.51%, the Hang Seng down 0.54%. In Europe the STOXX index is down 0.48%, CAC down 0.20%, DAX down 0.18%, FTSE down 0.60%.
Looking towards the New York open the DJIA equity index future is down 0.38%, SPX down 0.35%, NASDAQ down 0.36%. COMEX gold is down 0.59% at $1287.40 per ounce, with silver flat at $20.10 per ounce.
Forex focus
The yen jumped 0.5 percent to 102.07 per dollar early in London from yesterday. It climbed 0.2 percent to 139.09 per euro. The shared currency added 0.2 percent to $1.3625. The franc gained 0.4 percent to 89.68 centimes per dollar. The yen and Swiss franc rose against all their major peers as declines in Asian equities boosted demand for haven assets.
The U.K. currency fell 0.2 percent to 82.08 pence per euro early London time after rising 1.2 percent yesterday, the most since Dec. 18th. Sterling was little changed at $1.6601 after climbing to $1.6623, the strongest since Jan. 28th. The pound fell against the euro for the first time in three days after a house-price index dropped, strengthening the case for the Bank of England to keep interest rates as a record low to foster the recovery.
The Bloomberg Dollar Spot Index, which monitors the greenback versus 10 major counterparts, lost 0.1 percent to 1,023.22 after touching 1,021.55 in New York, the lowest since Jan. 13th.
Bonds briefing
Benchmark U.S. 10-year yields fell three basis points, or 0.03 percentage point, to 2.76 percent early in London. The price of the 2.75 percent note due in in February 2024 rose 1/4, or $2.50 per $1,000 face amount, to 99 7/8. Treasuries rose before data forecast to show retail sales stagnated with the Federal Reserve committed to a near-zero benchmark as long as inflation is kept in check.
The German 10-year yield fell two basis points, or 0.02 percentage point, to 1.70 percent early London time after rising to 1.72 percent yesterday, the highest since Jan. 30th. The price of the 1.75 percent bund maturing in February 2024 rose 0.17, or 1.70 euros per 1,000-euro face amount, to 100.485. German government bonds advanced for the first time in four days as a report showed the inflation rate in Europe’s largest economy stagnated last month.
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