There are some announcements made and data sets that are published, that take your breath away. The fact that the Chinese economy needs to create 10 million jobs per year and must sustain growth of at least 7.2% to achieve that, is one of the more stunning pronouncements analysts and traders will witness this year. Premier Li Keqiang made this announcement ahead of a key meeting of the Communist Party. Li’s comments were made in a speech published Monday on the website of the All China Federation of Trade Unions. Of course it’s all relative; in a country of circa 1.35 billion, creating that amount of jobs per year may not seem a lot until you compare it to, for example, the USA…
The USA population is circa 320 million, therefore the equivalent would be the USA creating circa 2.5 million jobs per year. And on current projections, based on the last NFP data, the USA is on a trajectory to create approx. 1.8 million a year, or is it? According to certain figures from the BLS and other official bodies, there are now 90.6 million American adults defined as economically inactive and out of the workforce. Roughly one third of those are available for work. And there’s an irony to the ten million a year that China needs to create vis a vis the USA figures; the USA has lost circa ten million in the workforce since 2008 when only 80 million were out of the workforce. Would anyone bet on China creating the level of jobs necessary without resorting to massive infrastructure building, such as the ‘ghost cities’ that have been built over recent years?
October 2013 Non-Manufacturing ISM Report On Business
There was positive sentiment news from the USA on Tuesday in the form of the non ISM business report. One of the few more positive prints since the temporary govt. shutdown ended.
At 55.4% Business Activity Index was at 59.7%. New orders index is at 56.8%. Employment Index at 56.2%. Economic activity in the non-manufacturing sector grew in October for the 46th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business. The report was issued by Anthony Nieves, CPSM, C.P.M., CFPM, chair of the Institute for Supply Management Non-Manufacturing Business Survey Committee. The NMI registered 55.4 percent in October, 1 percentage point higher than September’s reading of 54.4 percent.
EU Lowers Euro-Area Growth Forecast With Unemployment at Record Level
The European Union on Tuesday trimmed its forecast for euro-area growth in 2015 as the economy struggles to gain momentum with the Eurozone debt crisis dragging into a fifth year and unemployment still stubbornly high and at a record. Gross domestic product in the 17-nation currency bloc will rise by 1.1 percent in 2014, less than the 1.2 percent forecast in May, the Brussels-based commission said. Unemployment, now at its highest rate since the euro was introduced, will be 12.2 percent in 2014, higher than the 12.1 percent predicted six months ago.
New Zealand employment rises as labour market continues to improve
Employment growth continues in the New Zealand labour market, whilst wages still remain subdued, the Statistics office New Zealand stated on Tuesday. The employment rate rose to 64.4 percent and the unemployment rate fell to 6.2 percent. Over the September 2013 year, the number of people employed rose 2.4 percent in the Household Labour Force Survey (HLFS). Demand for workers from established businesses rose 1.9 percent in the Quarterly Employment Survey (QES).
Market overview
Despite the optimistic ISM non-manufacturing business print the DJIA closed down 0.13%, the SPX closed down 0.28%, and the NASDAQ closed up 0.08%. European indices reacted badly to the revised growth targets issue by the E.U. although some profit taking may have also been evident. STOXX closed down 0.83%, UK FTSE down 0.25%, CAC down 0.82%, DAX down 0.31%. The ASX, the Athens exchange fell badly by 2.10% as the troika once again visits the country with a black hole in the country’s finances set to be a huge debating point again. Greece believes the sum is circa €500 ml, others put the sum at €3 billion.
Oil fell badly on Tuesday, ICE WTI oil down 1.32% on the day at $93.37 per barrel. Now that the critical psyche level of $100 per barrel has been breached the commodity appears to be in free-fall. NYMEX natural closed up 0.38% at $3.48 per therm. COMEX gold closed up on the day by 0.28% at $1311.70 per ounce with silver down 0.03% at $21.70 per ounce.
Looking towards the market open/s for Wednesday the DJIA equity index future is currently flat, as is the SPX and NASDAQ. The European equity indices are down; STOXX off 0.82%, FTSE down 0.39%, CAC down 0.88% and DAX down 0.31%.
Forex focus
The yen rose 0.4 percent to 132.72 per euro after appreciating, the strongest level since Oct. 10th. Japan’s currency gained 0.1 percent to 98.50 per dollar. The euro dropped 0.3 percent to $1.3474 after sliding to $1.3442 yesterday, the weakest since Sept. 18th.
New Zealand’s dollar climbed versus its U.S. counterpart after the nation’s employment rose 1.2 percent from the prior quarter, according to Statistics New Zealand. The currency climbed 1 percent to 83.65 U.S. cents, the biggest increase since Sept. 18th on a closing basis.
Sterling advanced for a fifth day versus the euro after U.K. services output accelerated to the fastest in 16 years. Sterling gained 0.8 percent to 83.97 pence per euro. The U.K. currency advanced 0.5 percent to $1.6046.
The dollar rose to an almost seven-week high after the ISM gauge of service industries climbed more than forecast in October, adding to the case for the Federal Reserve to taper monthly bond purchases.
Bonds
Benchmark 10-year yields rose seven basis points, or 0.07 percentage point, to 2.67 percent as of 5 p.m. New York time. The 2.5 percent note due in August 2023 fell 18/32, or $5.63 per $1,000 face amount, to 98 17/32. The 10-year yield has risen 17 basis points in the past five days and reached the highest level since Oct. 16th. Thirty-year yields added eight basis points to 3.77 percent. Treasury 10-year notes fell for the fourth time in five days as the U.S. services sector grew faster than forecast last month, underpinning speculation the Federal Reserve may bring forward the timing of the supposed asset-purchase taper cuts.
Fundamental policy decisions and high impact news events that may affect market sentiment on November 6th
We receive a raft of PMIs in the morning trading session on Wednesday; the most eagerly anticipated being the European final services PMI expected to print at 50.9, no change from the previous month. The UK manufacturing and production figures are published, expected in at 1.2% and 0.7% respectively. European retail sales are predicted to fall by 0.3%, whilst Germany’s factory orders are expected to rise by 0.6%. Canada’s building permits are expected to rise to 7.8% from the disastrous figure of -21.2% the previous month. Later in the evening the unemployment numbers for Australia are published with the expectation that the number will come in at 5.7%.
