Daily Market Reports | Sep 06 2010
By Greg Peel
The sudden improvement in US economic data which began last week continued on Friday night with the release of the August jobs figures. With another round of census worker retrenchment included economists had expected net job losses to total 110,000, but in the private sector gains of around 40,000 were predicted.
There was thus a further fuelling of recent relief when the net figure came in at 54,000 net jobs lost, with the private sector adding 67,000. The unemployment rate nevertheless ticked up from 9.5% to 9.6% as expected.
The jobs number was quite simply enough to spur the Dow on the a rise of 127 points or 1.2% while the S&P added 1.3% to regain the 1100 mark, closing at 1104. But it was not all smooth sailing. Wall Street had made its gains immediately from the opening bell given the pre-market jobs number release but shortly after the release of the ISM services sector PMI caused a stumble.
Economists had expected the services PMI to fall to 53.5 in August from 54.3 in July so a reading of 51.5 – not far off contraction – was not well received. The service sector represents 80% of US output. The hesitation did not last long, however, and by the end of the session Wall Street had regained the highs, sending traders off to a more relaxed long weekend.
Earlier, China had released its services PMI and showed a gain to 57.6 from 56.3. The eurozone also saw an up-tick but the UK saw a down-tick, albeit to remain in expansion territory. Australia's equivalent rose to 47.5 from 46.6, remaining in contraction territory.
All up, Friday's global data were enough to encourage some more risk-taking. The US dollar index fell 0.5% to 82.02 and the Aussie risk indicator added 0.6 of a cent to US$0.9171. Gold fell US$4.70 to US$1246.60/oz.
Commodities were less inspired, with oil rising US42c to US$74.60/bbl while movements in base metals were mixed and minimal.
More notably however, the sharp sell-off in US Treasuries continued. The ten-year bond yield rose another 8 basis points to 2.71% and commentators are now expecting the rate to settle around 3% once more given the recent spate of more positive data.
The SPI Overnight gained 50 points or 1.1%.
In Australia today we will learn the construction sector PMI along with the ANZ job ads data and the TD Securities monthly inflation gauge. But the big news will be, at some point in the next 48 hours it is suggested, an election result. The Three Amigos are hoping to arrive at a decision in this time and commentators are leaning towards a Labor minority government as the most likely outcome.
Tomorrow the RBA will make a rate decision, but despite the strong June quarter GDP result the central bank will leave its cash rate unchanged at 4.5%. The June quarter is old news, and recent US data releases are not enough to overcome the general fragility of the global economy at this stage. The RBA will also recognise that not all of Australia is sharing in the bounty.
Australia's economic week then wraps up with home loan data on Wednesday and the unemployment figures on Thursday. Economists expect an addition of 29,000 jobs and a tick down in the unemployment rate from 5.3% to 5.2%.
It's a much quieter week on the economy front in the US this week. Markets are closed tonight for the Labor Day holiday, and Wednesday sees consumer credit data and the Fed Beige Book survey of economic activity. Thursday is the July trade balance, and Friday brings wholesale sales and inventories.
With the Treasury bond “bubble” looking shaky right at the moment, there will be much interest in this week's auctions of a net US$67bn of three and ten-year notes and thirty year bonds.
The Banks of Japan, Canada and England all make rate decisions this week while Japan will also release a final revision of its second quarter GDP on Friday. The market is also still awaiting any currency intervention in the yen. China will release its August trade balance on Friday.
On the local stock front, there is an extensive number of stocks going ex-dividend this week which will act as a drag on the index. We are also now revving up in AGM season, which will be the feature of September.
For further global economic release dates and local company events please refer to the FNArena Calendar.
