Stocks Finish Lower in Light Trade on Job Data Jitters
Nervous traders kept the U.S. equity markets under pressure
on Thursday following an unexpected rise in weekly jobless claims. This news
made traders more cautious about tomorrowâ€™s Non-Farm Payrolls Report. A worse
than expected employment number could send the stock markets sharply lower
since it would clearly send a signal that the U.S. economic recovery is stalling.
Treasury traders looked to the long-side on Thursday
following the bad claims number. T-Bond and T-Note traders could be speculating
on a weaker jobs number tomorrow. Some traders are taking outright long
positions in anticipation of the Fed renewing its asset-buyback program that
was beginning to get phased out. Whatever the report tells us tomorrow will set
the tone for the FOMC policy meeting next week.
An unexpected rise in U.S. weekly jobless claims sent the
Dollar/Yen sharply lower, putting it in a position to test the November 2009
low at 84.83. News that the number of Americans seeking unemployment benefits
rose fueled speculation that the U.S. economic recovery is stalling.
The weaker jobs data gave investors the jitters, encouraging
them to sell higher yielding equities. This sent traders into the safety of the
lower yielding Japanese Yen.
The Japanese Yen is set to rise even further especially if
tomorrowâ€™s U.S. Jobs Report is worse than expected. Furthermore, the Fed is
likely to put pressure on the Dollar next week following its FOMC meeting when
it is expected to announce the renewal of its quantitative easing program.
Gains in the Yen could be limited by talk that the Bank of
Japan is set to intervene. Although the Japanese government is issuing verbal
interventions at this time, further appreciation in the Yen may hurt exports
and the economy, forcing it to act more decisively than in the past.
The U.S. Dollar traded trading mostly lower versus the major
currencies today in light trading as traders curtail activity ahead of Fridayâ€™s
U.S. Non-Farm Payrolls Report. The employment report is expected to show a
decline of 65,000 to 90,000 jobs, pushing up the unemployment rate to 9.6%. The
public-sector part of the report is expected to show a loss of at least 165,000
jobs due to government firings of census workers. The private-sector is
forecast to have added at least 100,000 jobs.
The focus will most likely be on the private-sector number.
It this number comes out better-than-expected, look for the Dollar to rise.
The Dollar has been under pressure most of the trading day
due to a surprise drop in weekly initial claims. Unemployment benefits rose by
19,000 to 479,000 in the latest week. Pre-report estimates called for a drop to
The European Central Bank and Bank of England monetary
policy committees voted to leave there respective benchmark interest rates
unchanged at historically low levels. The ECB left its key borrowing rate at
1%. The BoE agreed to maintain its 0.50% level. Both moves by the central banks
Following the release of the interest rate decision, ECB
President Trichet noted that the European bank stress tests completed since the
last meeting have helped increase transparency and fueled a move toward
restoring market confidence in the banking sector.
In the wake of recent strong Euro Zone economic data,
analysts had expected Trichet to outline an exit strategy or discuss the ECBâ€™s
plan for its special liquidity provisions. In other words, is the ECB going to
continue to provide free-flowing liquidity to the market or begin to withdraw
it. Trichet indicated the ECB would consider this action on that next month.
Trichet failed to say anything really bullish about the
Euro, but actually may have helped limit gains by stating that the second half
of 2010 was likely to be â€śmuch less buoyantâ€ť than the second quarter because of
the implementation of new financial austerity measures. He also added that it
was too early to â€śdeclare victoryâ€ť in the economic crisis.
Based on todayâ€™s comments, the Euro is most likely to
continue to be driven by economic news regarding the U.S. economy. At this time, the ECB
seems a little more upbeat about the Euro Zone economy while the U.S. Fed is
being encouraged to consider the renewal of its quantitative easing program to
ward off a potential double-dip recession. As long as the U.S. economy remains weak and
interest rates low, look for the Euro to remain firm.
The Bank of England as expected left interest rates
unchanged. Traders will not be watching economic reports to see if the
implementation of new austerity measures and tax hikes has an adverse affect on
the economy after strong second-quarter GDP data was posted. The central bank
will also continue to monitor the inflation rate which is currently above the
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Tue 31 July 2018 AA JP- Bank of Japan A 06:00 DE- Retail Sales A 09:00 EZ- flash HICP/GDP AA 12:30 US- Core PCE Deflator A 14:00 US- CB Consumer Confidence Wed 1 Aug 2018 A Final Mfg PMIs AA 12:15 US- ADP Private Payrolls A 15:00 US- EIA Crude AA 18:00 US- Federal Reserve Decision Thu 2 Aug 2018 AA 11:00 GB- Bank of England Decision A 13:30 US- Weekly Jobless Fri 3 Aug 2018 A Final Services PMIs AA 12:30 US- Employment A 12:30 US/CA- Trade
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