The US$ ended mixed on Friday, after a choppy session following the release of the mixed US unemployment data which saw the headline rate fall to a49-year low, while the headline NFP missed expectations although the previous month was revised higher. The headline unemployment rate dropped to 3.7% in September, down from 3.9% and beat expectation of 3.8%, while the participation rate was unchanged 62.7%. The NFP figure came in at 134k against the expectation of +188k but, offsetting the miss, the August figure was revised upward, from 201k to 270k and put a better light into the September reading. The average hourly earnings rose 0.3% mm, in line with expectations. Elsewhere in the US, the August trade deficit widened to -$53.2bio but was slightly better than the expectation of $53.5 bio, and helped to underpin the dollar.
Of note in the currency markets, Sterling was well bid on hope of Brexit progress, while the Aud and Kiwi remain very heavy, not helped by the surging US bond yields. The US10Y finished at 3.25%, while the 30Y is now up to 3.4%. Fed fund futures yields continued to price the chance of another rate hike in December at 80%. Higher rates kept the pressure on the US stock indices, with the DJI/S+P both down by around 0.6%. The metals were unfazed – so far – by the higher yields, and finished steady, while WTI ended the week with a choppy but rangebound session.
Note that over the weekend the PBOC cut the reserve requirement ratios (RRRs) for Chinese banks – currently at 15.5% for large commercial lenders and 13.5% for smaller banks – as the Beijing leadership seeks to bolster the slowing Chinese economy. These will both be cut by 1% from October 15. The injection of cash will be 750bn CNY ($109.2 billion), and will go some way to offset the negative impact of higher US tariffs on Chinese exports,and may give Chinese stocks a boost when they re-open today, after last weeks Golden Week holiday.
The coming week will start quietly enough being a US holiday and much of the day will be spent in re-positioning following last Friday’s NFP figure. There is very little due today, although the Fed’s Bullard will be speaking in Singapore which may provide Asia with some interest. The economic highlights will be the ANZ Job Ads for September, the China Caixin China Services PMI, the German Industrial Production (Aug), with the main interest of the session lying in the release of the EU Sentix Investor Confidence Survey. Expect a quiet one due to the US holiday.
For the rest of the week the main events will be:
Tuesday: NAB Australian Business Conditions/Confidence (Sept), German Trade Balance (Aug), US NFIB Business Optimism Index (Sept)
Wednesday: NZ Electronic Card Retail Sales (Sept), Australian WBC Consumer Confidence (Oct), ECB Non-Monetary Policy Meeting, UK Manufacturing/Industrial Production (August), UK Trade Balance, UK GDP (Aug), US PPI (Sept), Wholesale Inventories (Aug)
Thursday: NZ Food Price Index (Sept), Australian Consumer Inflation Expectation (Oct), UK BOE Credit Conditions Survey, ECB Monetary Policy Minutes, US CPI (Sept), Jobless Claims,
Friday: NZ Business PMI, Australian Financial Stability Report, Home Loans, Investment Lending for Homes (Aug), China Trade Balance (Sept), Foreign Direct Investment, German CPI/HICP (Sept), EU Industrial Production (Aug), US Import/Export Index (Sept), Preliminary Michigan Consumer Sentiment Index (Oct),
|INDICES / COMMODITIES|