Employment and unemployment numbers were the big news events on Thursday for the USA and the news was very positive, particularly the ‘Challenger Report’ which announced the lowest level of layoffs since 1997, a quite incredible and very welcome bullish statistic. Further the USA weekly unemployment numbers came in slightly better than forecast, with 15,000 less claims for the week. Finally it would appear that the USA senate has reached an agreement on extending the benefits for circa 1.4 million claimants. And the sum total of all this good employment news from the USA? The DJIA fell marginally to close the day down 0.11%. Perhaps a better than expected NFP print may accelerate the index back up through the 16,500 barrier on Friday.
In other news the UK’s BoE caused no surprises on Thursday announcing that both the base interest rate and the level of quantitative easing will remain the same at 0.5% and £375 billion. The ECB followed suit by maintaining an unchanged interest rate policy. The euro gained 0.2% on the day after Mario Draghi, the ECB president, announced that he intends to keep the rates at that level until more positive European economic growth is apparent.
December: Fewest Layoff Announcements Since 1997 – Challenger
Announced job cuts fell to the lowest level of the year in December as U.S.-based employers reported plans to reduce payrolls by 30,623 during the month. That was down 32 percent from a November total of 45,314. For the year, job cuts were down about 3.0 percent from 2012, according to the latest report on monthly job cuts released Thursday by global outplacement consultancy Challenger, Gray & Christmas, Inc. The December total was six percent lower than the 32,556 job cuts announced in the same month a year earlier, marking the third consecutive year-over-year decline.
USA weekly unemployment claims falls by 15,000
In the week ending January 4, the advance figure for seasonally adjusted initial claims was 330,000, a decrease of 15,000 from the previous week’s revised figure of 345,000. The 4-week moving average was 349,000, a decrease of 9,750 from the previous week’s revised average of 358,750.
The advance seasonally adjusted insured unemployment rate was 2.2 percent for the week ending December 28, unchanged from the prior week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending December 28 was 2,865,000, an increase of 50,000 from the preceding week’s revised level of 2,815,000. The 4-week moving average was 2,872,250, an increase of 18,750 from the preceding week’s revised average of 2,853,500.
ECB monetary policy decisions
At Thursday’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.25%, 0.75% and 0.00% respectively.
Bank of England maintains Asset Purchase Programme at £375 billion
The Bank of England’s Monetary Policy Committee today voted to maintain Bank Rate at 0.5%. The Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £375 billion. The Committee reached its decisions in the context of the monetary policy guidance announced alongside the publication of the August 2013 Inflation Report.
Market overview at 10:30 PM UK time
The DJIA closed down 0.11%, the SPX closed up 0.03%, with the NASDAQ down 0.23%. European indices experienced a major reversal in the afternoon session after a very positive open; Euro STOXX fell by 0.66%, CAC down 0.84%, DAX down 0.80%, the FTSE closed down 0.45%.
Looking towards the markets’ open on Friday the DJIA equity index future is down 0.09%, SPX up 0.4% with the NASDAQ future down 0.45%. Euro STOXX equity index future is down 0.52%, DAX future is down 0.68%, CAC future is down 0.75% and the UK FTSE future is down 0.41%.
NYMEX WTI oil finished the day flat at $92.34, NYMEX nat gas crashed by 4.03% to $4.03 per therm. COMEX gold finished the day up 0.15% at $1227.30 per ounce with silver on COMEX up 0.16% at $19.57 per ounce.
Forex focus
The euro gained 0.2 percent to $1.3603 late afternoon in New York after declining to $1.3549, the lowest level since Dec. 5th. It failed to breach the 100-day moving average of $1.3546, a measure of momentum. The common currency added 0.2 percent to 142.58 yen. The dollar traded at 104.81 yen.
The Dollar Spot Index, tracking the U.S. currency versus 10 of its major counterparts, fell 0.1 percent to 1,028.30 after climbing to 1,030.42, the highest level since Sept. 9th. The euro rose from the lowest level in a month as European Central Bank President Mario Draghi strengthened his pledge to keep interest rates low for an extended period to protect economic gains.
The loonie depreciated 0.3 percent to C$1.0850 per U.S. dollar and touched C$1.0875, the weakest level since October 2009. The Canadian dollar reached the weakest level since 2009 amid speculation slowing employment growth will push the Bank of Canada closer to considering lowering interest rates.
The euro has gained 8.8 percent in the past 12 months, the best performer of 10 developed-nation currencies tracked by Bloomberg’s Correlation-Weighted indices. The dollar has gained 4 percent, whilst the yen has crashed by 14 percent.
Bonds
The current 30-year bond yield fell two basis points, or 0.02 percentage point, to 3.87 percent at mid-afternoon in New York. The 3.75 percent securities due in November 2043 gained 11/32, or $3.44 per $1,000 face amount, to 97 27/32. The yield reached 3.97 percent on Jan. 2nd, the highest since August 2011.
Benchmark 10-year yields lost three basis points to 2.97 percent. They climbed to 3.05 percent on Jan. 2nd, the highest since July 2011. Treasuries rose after yields at almost more than two-year highs attracted higher-than-average bids at the U.S. auction of $13 billion of 30-year bonds.
Fundamental policy events and high impact news events that may affect sentiment on January 10th
Friday sees Japanese data published in the overnight/early morning session; the leading indicators are predicted to come in at 110.9%. The Swiss unemployment rate is predicted in at 3.2%, French industrial production is anticipated to rise from -0.3% to +0.6%. China’s CPI is expected to have fallen by 0.1% with new loans up to 589 bn.
The UK’s manufacturing production is expected in at a positive 0.4% up, as is industrial production at a similar print. Final GDP for Europe is expected to come in up 0.3%.
Canada’s employment change is expected to register up 13.3K, a fall from the 22K of the previous month. The unemployment rate is expected to remain at 6.9%. The USA unemployment rate is expected to have remained static at 7% with NFP numbers expected to show 194K jobs created. Average hours worked by USA workers are expected to have risen by 0.2%, whilst the data for wholesale inventories is expected to show a 0.4% rise.
The week of high impact news events and policy decisions concludes with the UK’s NIESR GDP estimate expected at 0.8% similar to the last ONS print. The National Institute of Economic and Social Research (NIESR), Gross Domestic Product (GDP) prints a change in the estimated value of all goods and services produced by the UK economy during the previous 3 months, NIESR estimates GDP data on a monthly basis in an effort to predict the quarterly government-released data.
