Daily Market Reports | Jul 05 2010
By Greg Peel
The US non-farm payrolls data released on Friday night showed a loss of 125,000 jobs. Earlier estimates had 110,000 jobs being lost so this was, in theory, a disappointing result, however a weaker than expected ADP private sector jobs number, released on Wednesday, had some economists revising down estimates to more like 140,000 jobs being lost. So on that basis the number was not as bad as it could have been.
The data were complicated by the loss of 210,000 temporary census positions in June. All up, the important figure was a gain of 83,000 jobs in the private sector for June. This is a weak result, given around 200,000 jobs need to be added each month just to account for natural population growth. The unemployment rate nevertheless surprisingly fell from 9.7% to 9.5% when economists had expected a rise to 9.8%. While this looks promising, all it really means is the participation rate fell in June. Many of those previously registered as unemployed simply gave up and fell out of the data.
The other economic data release on Friday was US factory orders for May. Economists had expected a fall of 0.8% so a fall of 1.4% was again testament to a slowing US recovery. That's the biggest fall in 14 months, albeit impacted by the sizable and volatile transport equipment component.
The weak data had the Dow down 118 points at lunchtime. However at that point, the buyers came in and pushed the average right back to the flatline. With ten minutes to go before the closing bell, the Dow was positive. Ten minutes later it was down 46 points, or 0.5%. The S&P also closed down 0.5% to 1022.
Tonight is a public holiday in the US for the July 4 weekend, and volumes on the NYSE were very thin all day Friday. By the time that ten minute selling wave hit, there would have barely been a soul left on the floor of the exchange.
Friday's trade once again saw strength in the euro, sending the US dollar index down slightly to 84.37. The Aussie slipped to US$0.8417. Gold managed a decent rebound from its big sell-off on Thursday night, rising S$11.90 to US$1211.40/oz.
Commodities were mixed on the weak US data. Oil fell US81c to US$72.14/bbl while copper rose 1% and zinc 2% in a mixed session for base metals.
The SPI Overnight fell 30 points or 0.7%. The local market has been generally weaker than the US market in the past run of weak sessions – the longest since the darkest days of the GFC. The replacement of the proposed RSPT with a new MRRT on iron ore and coal did little to inspire the market on Friday given much uncertainty still surrounds the detail. On first glance, it appears miners of an array of commodities are off the hook. But junior iron ore and coal miners are so far feeling duped by a government prepared only to talk to, and appease, the big boys.
Bulk mineral prices will be an important consideration for the RBA in the next few months. While most economists now expect the RBA to remain on hold perhaps to the end of the year, as it balances falling unemployment and rising inflation against global economic weakness, the swing factor will be the next round of price settlements for iron ore and coal. If we see prices drop, the RBA may be forced to think carefully about perhaps cutting the cash rate.
It will be interesting to read Glenn Stevens' thoughts on the matter, due in his monetary policy statement on Tuesday. No change to the cash rate is expected at this stage.
Today in Australia we'll see the latest job ads data from ANZ, the AiG services sector index and the monthly inflation gauge from TD Securities. Tomorrow brings the trade balance figures along with the RBA meeting, Wednesday it's the AiG construction sector index, and then on Thursday our unemployment numbers are released.
The US sees its service sector PMI on Tuesday, followed by consumer credit and chain store sales on Thursday and wholesale inventories on Friday.
The eurozone will provide a final revision of its first quarter GDP on Wednesday, before both the ECB and Bank of England make rate decisions on Thursday. No change to rates is expected, but all eyes will be on the ECB and any hints of stepping up quantitative easing measures in the face of the European debt crisis.
And a final reminder – no US markets tonight.
For further global economic release dates and local company events please refer to the FNArena Calendar.
