The ADP report came in with a far bullish jobs count than many economists had forecast, and on Thursday the jobs subject was centred on the weekly unemployment claims in the USA and those numbers were extremely healthy too. For the first time in months the number dipped below the critical 300K level. The number had stubbornly maintained in a range of circa 320-350K for many months, so the low print came as quite a surprise. Now the smoothed average was still above 300K at 322K but let’s not “look a gift horse in the mouth” (an English expression), the jobs prints have been excellent over this week.
Now can this optimism and improvement extend to the NFP print on Friday? Well all the indications are positive, including the Challenger Grey job numbers on Thursday, showing that layoffs reduced substantially in November 2013 versus November 2013. The main USA indices/bourses are in need of a lift given the selloff experienced all week, could NFP provide it?
The good USA news didn’t stop with jobs on Thursday, the USA GDP also rose; the annual rate is at 3.6%, with a 2.5% figure reached in the second quarter, again impressive numbers from the USA.
There was some negative news with regards to the USA economy, factory orders fell by 0.9% in the month of November, the blame of which was apportioned to poor airplane sales data.
In other news the ECB maintained its interest rates at current rates; this provided a boost to the value of the euro versus many of its peers, quite why this news surprised the market was curious, as there had been no indication from ECB officials that a reduction was on the radar. Perhaps the belief was that, in order to push the euro lower, talk is cheap and the ECB needs to take further action if (as thought by many market commentators) policy makers want the euro closer to 13000 versus the USD.
US Unemployment Insurance Weekly Claims Report
In the week ending November 30th, the advance figure for seasonally adjusted initial claims was 298,000, a decrease of 23,000 from the previous week’s revised figure of 321,000. The 4-week moving average was 322,250, a decrease of 10,750 from the previous week’s revised average of 333,000. The advance seasonally adjusted insured unemployment rate was 2.1 percent for the week ending November 23, unchanged from the prior week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending November 23 was 2,744,000, a decrease of 21,000 from the preceding week.
US Gross Domestic Product, 3rd quarter 2013 (second estimate)
Real gross domestic product, the output of goods and services produced by labour and property located in the United States, increased at an annual rate of 3.6 percent in the third quarter of 2013 (that is, from the second quarter to the third quarter), according to the “second” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 2.5 percent. The GDP estimate released today is based on more complete source data than were available for the “advance” estimate issued last month.
ECB Monetary policy decisions
At today’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.
Challenger: 2013 November Job Cut Report
Job cuts were virtually unchanged in November, as U.S. based employers announced plans to shed 45,314 workers from their payrolls. That marks a decline of just 0.9 percent from the 45,730 planned job cuts announced in October, according to the latest report on monthly job cuts released Wednesday by global outplacement consultancy Challenger, Gray & Christmas, Inc. November job cuts were 21 percent lower than the same month a year ago, when planned layoffs totalled 57,081; the second highest monthly total in 2012.
U.S. factory orders fall on weak aircraft demand
New orders for U.S. factory goods fell in October as demand for aircraft and capital goods weakened, suggesting some cooling in manufacturing. The Commerce Department said on Thursday orders for manufactured goods dropped 0.9 percent after rising 1.8 percent in September. Economists polled by Reuters had forecast orders falling 1.0 percent in October. Factory orders were weighed down by a 5.7 percent decline in transportation equipment as bookings for civilian and defense aircraft and parts tumbled. Orders excluding the volatile transportation category were flat.
Market overview
The DJIA closed down 0.43% at 15821.52, now the fifth day the index closed lower. SPX was down 0.43% and the NASDAQ down 0.12%. European indices suffered badly during Thursday’s trading sessions; STOXX closed down 1.29%, CAC down 1.17%, DAX down 0.61% and the UK FTSE down 0.28%. The DJIA equity index future is at the time of writing down 0.43%, SPX future down 0.44%, NASDAQ down 0.11%. STOXX future is down 1.24%, DAX down 0.50%, CAC down 1.21%, FTSE future down 0.34%.
NYMEX WTI oil closed up 0.16% on the day at $97.36 per barrel, NYMEX nat gas up 4.44% at $4.14 per therm. COMEX gold closed down the day at $1225.70 per ounce with silver on COMEX down 2.24% at $19.38 per ounce.
Forex focus
The euro advanced 0.6 percent to $1.3671 late in New York after rising to $1.3677, the strongest level since Oct. 31st. The single currency was little changed at 139.10 yen after weakening as much as 0.5 percent. The dollar fell 0.6 percent to 101.74 yen. The euro rose to a five-week high versus the dollar as European Central Bank President Mario Draghi refrained from introducing further monetary stimulus.
Sterling slumped 0.9 percent to 83.74 pence per euro late London time, the biggest decline since March 7th. The pound dropped 0.4 percent to $1.6315 after climbing to $1.6443 on Dec. 2nd, the highest since August 2011.
The euro has gained 7.8 percent this year, the best performer of 10 developed-nation currencies tracked by Bloomberg’s Correlation-Weighted Indices. The dollar has appreciated 3.6 percent, while the yen has crashed 13.2 percent.
Bonds
The benchmark 10-year note yield rose three basis points, or 0.03 percentage point, to 2.87 percent late New York time. The yield reached 2.88 percent, the highest since Sept. 18th. The price of the 2.75 percent security due in November 2023 fell 9/32, or $2.81 per $1,000 face amount, to 98 31/32. Yields on five-year notes added four basis points to 1.48 percent and touched 1.49 percent, the highest since Sept. 23rd. Thirty-year bond yields increased to 3.92 percent, a two-week high, before trading at 3.91 percent.
Fundamental policy decisions and high impact news events for December 6th
Friday sees Japan’s leading indicators published, France’s trade balance is expected in at €-5.1bn, Germany’s factory orders are expected to fall by -0.4%. Canada’s unemployment number is expected to rise to 7.0%. Non-farm jobs created are expected in at circa 184K, with the USA unemployment expected in at 7.2%. Personal spending in the USA is expected in up 0.4%, whilst the preliminary university of Michigan survey of consumer sentiment expected in at 76.2. Later on Friday sees FOMC member Evans hold court, with the BOJ governor Kuroda holding court later in the evening. Late Friday evening-early Saturday morning China’s trade balance is published.
