The US July non-farm payrolls came in pretty much in line with expectations on Friday (+164K vs +165K), and while the previous months revisions were mildly negative (from +224K to +193K), wage growth was upbeat, with the average hourly earnings at +3.2% yy against the +3.1% expected. The headline unemployment rate rose to 3.7% but so did the participation rate (63.0% vs 62.9% prior). This meant little real effect on the markets which remained more focused on the escalation of tensions in the trade war between the US/China, and which seems to have no positive end in sight. Risk aversion therefore remains at the forefront of traders’ minds, and led to ongoing strength in the Swiss Franc and Japanese Yen on Friday, along with weakness in the Aud$ and the Nzd$, while the US dollar came under some mild downside pressure because the jobs report failed to diminish expectations that the Fed could cut rates again next month. Stock markets finished lower, for the 5th consecutive session, with the main indices down by -0.4% (DJI) /-1.3% (Nasdaq). WTI actually stage a bit of a recovery after Donald Trump reportedly said that the proposed tariffs on China could be delayed or halted if Beijing “takes positive action.”, while the metals were choppy, and ended a little lower.
In other markets, bond yields are heading sharply lower around the world as the trade-war fears escalate. US10Y have plunged to 1.85% on Donald Trump’s announcement of further tariffs , while German 10Y bunds are at -0.489%, an all time low and where the entire German yield curve is now in negative territory, with the 30Y bund falling to -0.006%. Also note that Iron Ore fell 5% on Friday and won’t provide any assistance to the commodity bloc currencies on Monday, or the ASX I suspect.
Looking ahead, the coming week will be another busy one, although the focus, for once, will be less on the US and more on the RBA and RBNZ, both of which have a Monetary Policy Meeting (Tue/Wed), and where the RBA are expected to stay on hold while maintaining a dovish outlook, and the RBNZ are expected to cut by 25bp, which should keep the pressure on the Kiwi.
Elsewhere, Monday will be mostly about the global Services/Composite PMIs, and Tuesday will feature the NZ Unemployment and RBNZ Inflation Expectations as we head towards the RBNZ. Wednesday and Thursday will see a relatively thin calendar, while Friday will feature the Japan Q2 GDP, RBA Monetary Policy Statement, China CPI/PPI, the UK Q2 GDP, and the US PPI. Have a good week.
Economic data highlights will include:
Mon: Australian AIG, CBA Performance of Services/Composite Indexes, TD Inflation, ANZ Job Ads, Caixin China Services PMI Japan Markit Manufacturing/Services/Composite PMIs Services PMI, EU Sentix Investor Confidence Survey, EU/US Services/Composite PMIs, ISM Non Mfg PMI
Tue: NZ Unemployment, RBNZ Inflation Expectations, Australian Trade Balance, RBA Interest Rate Decision/Statement, German Factory Orders, US Fed Bullard Speech, Global Dairy Trade Index, API Weekly Crude Oil Stock Inventory
Wed: AIG Performance of Construction Index, RBNZ Interest Rate Decision/Statement/Press Conference, Australian Home Loans, German Industrial Production, US Consumer Credit Change, EIA Crude Oil Stocks Weekly Change,
Thur: Japan Bank Lending, Eco Watchers Survey, Current Account, China Trade Balance, US Jobless Claims, Wholesale Inventories,
Fri: NZ Visitor Arrivals, Japan Q2 GDP, RBA Monetary Policy Statement, China CPI/PPI, New Loans, German Trade Balance, UK Q2 GDP, Manufacturing/Industrial Production, NIESR GDP Estimate, Trade Balance, Goods Trade Balance, RBA Governor Lowe Speech, US PPI,
Market moves, in brief:
FX: DXY 98.09 (-0.31%)
Bonds: US10Y; 1.855% (-2.23%), German 10Y; -0.489% (-7.07%), UK 10Y; 0.554% (-4.98%), Australian 10Y; 1.098% (-10.07%), NZ 10Y; 1.37% (-6.16 %), China 10Y; 3.100% (-3.37%)
Stock Indices: DJI; -0.37%, S+P; -0.73%, NASDAQ; -1.32%, EUStoxx50; -3.26%, FTSE100; -2.34%, Shanghai Composite; -1.41%,
Metals: Gold $1441 oz (-0.27%), Silver $16.20 oz (-0.74%), Copper $2.5715 lb (-3.53%), Iron Ore $106.51 per tonne (NYMEX) (-4.92%),
Oil: WTI $55.21 pb (+1.23%)
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