Daily Market Update 06th June 2016
ECONOMIC DATA OF THE DAY
|02.00pm||EUR||Germany Factory Orders MoM||-0.5%||1.9%|
US: Nonfarm Payrolls was much lower than expected adding 38k job compared to 160k expected and the worst data since 2010. Data for March and April was revised lower by a collective and materially significant 59,000 jobs.
The month-long strike by workers at telecom giant Verizon probably cost 35,100 jobs. . The private sector added a mere 25,000 jobs (Mkt est: 150k), the smallest since February 2010. Manufacturing employment fell 10,000 and construction payrolls dropped 15,000, the most since December 2013. Mining employment fell 10,000. Retail payrolls increased 11,400. Wholesale trade employment fell 10,300. Temporary-help jobs declined 21,000. Government payrolls rose 13,000 and healthcare jobs leapt 55,400. The unemployment rate dropped three-tenths of a percentage point to 4.7% (Mkt est: 4.9%) which is the lowest level since November 2007 however that was primarily due to the fact that 458k Americans gave up their search for work. The participation rate declined 0.2 percentage points to 62.6%. Wage growth was the only positive of the report. Average hourly earnings of private-sector workers increased 0.2% to $25.59. YoY hourly wages rose 2.5%, higher than the 2.1% average during most of this economic expansion. ISM Non-Manufacturing dropped to 52.9 from 55.7 (Exp. 55.3). U.S. factory orders rose at their fastest pace in six months during April. Reflecting a jump in orders for commercial aircraft factory orders spiked 1.9% (Mkt est: %) after rising an upwardly revised 1.7% in March (Prev: +1.1%). Durable goods orders jumped 3.4%. Orders for non-defense aircraft and parts surged 65.3%.
The U.S. trade deficit widened during April. The trade deficit rose 5.3% MoM to a seasonally adjusted $37.44bln (Exp. $41.5bln). Exports increased 1.5% while imports rose 2.1%. March’s trade deficit was revised lower by almost $5bln to $35.54bln and was the lowest deficit since December 2013.
Fed Speech: Federal Reserve Governor Lael Brainard called for the FOMC to wait for more economic data as well as the “Brexit” vote before raising interest rates. “Recognising the data we have on hand for the second quarter is quite mixed and still limited, and there is important near-term uncertainty, there would appear to be an advantage to waiting until developments provide greater confidence.”, “The data in today’s labor market report on balance suggest that the labor market has slowed.”
FOREIGN EXCHANGE (INDICATIVE RATES)
|Currency||Last||% Change||Overnight Range|
|DXY||94.13||-1.60%||93.855 – 95.638|
|EURUSD||1.1349||1.87%||1.1137 – 1.1374|
|USDJPY||106.66||-1.87%||106.38 - 109.03|
|AUDUSD||0.7341||1.49%||0.7234 – 0.7391|
|GBPUSD||1.4369||0.38%||1.4399 - 1.4582|
Commodities (INDICATIVE RATES)
|Currency||Price USD||% Change||Overnight Range|
|Gold||1247.24||3.10%||1207.63 - 1246.37|
|Silver||16.44||2.85%||15.9588 - 16.4541|
|Oil (BRENT)||49.77||0.32%||49.3 – 50.33|
|Oil (WTI)||48.79||0.77%||48.33 – 49.41|
(Source: Bloomberg and Saxo)
Gold: The Long cleanup seen in Gold and Silver last week allowed all the precious metals to rally hard from the supports following the poor NFP. Gold should find some short term resistance at the 50d MA at 1246.82. Silver is now way above the 16 support following the NFP number.
Oil: Even Base Metals rallied with the USD lower against all currencies. Zinc rose for a seventh session in its longest rally in almost two years, while copper and other industrial metals advanced as an increase in U.S. factory orders helped boost demand prospects. Copper stockpiles in warehouses tracked by the Shanghai Futures Exchange fell for a fourth week to the lowest since Jan. 21. Aluminum inventories monitored by the LME slumped for a 56th day, the longest streak since 2000.
The worst NFP number since 2010 pushed Rates and USD much lower on Friday. The market was going more and more for a rate hike in June and July and this NFP is confirming that the 2nd quarter data has been mixed in the US. DXY fell hard from the 100d MA to drop to the support at 94.00. Every currency rallied again USD, even Emerging Markets currencies most probably on Stop Losses as the CFTC data is showing that Leveraged funds added to their net long USD positions in the week ended 31 May after turning long in the previous week on speculation trhat the Fed would start hiking rates in June or July.
US, China Make Great Progress in Currency Talks, Lew Says
The U.S. and China have made progress on their exchange-rate debate over the years while the Asian nation’s ability to control excess capacity will be central for expanding its economy, Treasury Secretary Jacob J. Lew said Sunday in Beijing. Lew, speaking to students at Tsinghua University, said China’s government is moving in the right direction on its currency. He, however, added that the People’s Bank of China in August “was not clear” in its communication about the currency. “China has committed to moving in an orderly way to a more market oriented exchange rate,” Lew said. “It’s important for China to stick to its reform agenda.” The U.S. has urged China to implement measures to support domestic demand and increase household income, improve economic transparency and liberalize investment rules. Authorities have cut excess industrial capacity including for coal and steel, while the nation plans to seek ways to increase the yuan’s convertibility by changing currency policy and opening up the finance industry, according to the Communist Party’s next five-year plan. Lew is scheduled to participate in the U.S.-China Strategic and Economic Dialogue Monday and Tuesday in Beijing that will be attended by China Vice Premier Wang Yang, State Councilor Yang Jiechi and U.S. Secretary of State John Kerry. The U.S. won’t be critical if the yuan is allowed to fluctuate, Lew also said during a question and answer session. “It’s actually been intervening to strengthen not to drive down the renminbi” he said. The issue remains important “because it matters deeply in terms of the perception of whether or not there’s a level playing field and whether there’s fair competition between our two great countries. But it’s now an issue where we can look back and say we’ve made great progress.” Lew said China’s excess capacity has enormous effect on the global steel industry, and he said other nations are raising questions about China capacity surplus. Excess capacity corrodes an economy’s efficiency, he said. “We need to make sure we continue in the future to see the policies follow along in a positive way.” (Source: bloomberg.com)