Friday 21.00 BST
What you need to know
- US non-farm payrolls rise 209,000 in July, more than expected
- Dollar and Treasury yields jump as analysts point to December rate rise
- Dow sets eighth successive record closing high
- Oil prices end choppy week on firm note
Overview
The dollar finally enjoyed some respite and the benchmark 10-year US Treasury yield climbed off a one-month low as a solid jobs report supported the case for the Federal Reserve to press ahead with plans for policy normalisation.
US equity indices hovered near record highs — with the Dow Jones Industrial Average touching an all-time peak of 22,089.05 in early trade — with financials bolstered by the rise in yields.
European bourses ended the week on a strong note, helped by a sharp retreat for the euro against the dollar. Energy stocks underperformed on both sides of the Atlantic despite a rally for oil prices following a very choppy week.
Hot topic
The big focus was on the US economy. Non-farm payrolls rose by 209,000 last month — more than expected — following an upwardly revised 231,000 increase in June. The jobless rate eased to 4.3 per cent from 4.4 per cent.
Average hourly earnings rose 0.3 per cent in July, as expected, leaving the year-on-year rate of increase at 2.5 per cent, against expectations for a dip to 2.4 per cent.
“The combination of lower unemployment and better wage data . . . supports the Fed’s case for announcing ‘quantitative tightening’ — shrinking the balance sheet — in September and raising rates again in December,” said Mikael Olai Milhøj, senior analyst at Danske Bank.
“However, we still think the jobs report underpins the Fed’s dilemma; unemployment and wage inflation are low at the same time.
“The problem is that the tightness of the labour market is not the only factor determining wage growth. Second-round effects following many years with low inflation have hit wage growth.”
Futures markets continued to price in a less than 50 per cent probability of the Fed raising rates for the third time this year in December, according to CME Group’s FedWatch tool.
“The [NFP] data reinforce a view that the market is significantly under-pricing Fed risks, most obviously for 2018,” said Alan Ruskin, strategist at Deutsche Bank.
“However, this is too far off to do the dollar much good. The way the data should be thought of is that it should provide dollar ‘downside protection’ at key levels, rather than decisively turn the currency around.”
Forex and fixed income
Nevertheless, the jobs figures prompted a huge sigh of relief among dollar ‘longs’ as the US currency rallied 0.7 per cent against a weighted basket of peers, after hitting 15-month lows earlier in the week.
The euro sank 0.9 per cent to $1.1755 on Friday — after briefly climbing above the $1.19 level on Wednesday — leaving it barely changed over the week. The dollar was up 0.6 per cent against the yen at ¥110.66.
Sterling, meanwhile, was down a further 0.7 per cent versus the dollar at $1.3043. It closed at $1.3131 a week ago.
The Bank of England delivered a dovish hit to the UK currency on Thursday after its scheduled policy meeting.
“No rate rise, only two votes against this decision and the economic outlook was lowered slightly,” said Lutz Karpowitz, currency analyst at Commerzbank.
“Compared with market expectations that was disappointing. Comments from the central bank had caused rate hike speculation recently.”
The 10-year UK gilt yield tumbled to its lowest for more than a month, before partially recovering yesterday to 1.17 per cent, still down 5bp over the week.
In the US fixed income arena. the 10-year Treasury yield, which moves inversely to its price, was up 4 basis points at 2.26 per cent. It hit 2.218 per cent on Thursday, the lowest since June 27, as participants watched developments in the probe into Russian involvement in the US election.
The German 10-year Bund rose 2bp on Friday to 0.48 per cent, but was still 7bp lower for the week — the biggest weekly fall since April.
Equities
On Wall Street, the Dow secured an eighth successive record closing high of 22,090 as it gained another 0.3 per cent. The gauge rose 1.2 per cent over the course of the week,
The broader S&P 500 equity index added 0.2 per cent on Friday to 2,476 — just a point shy of its record close last week — and registered a weekly advance of 0.2 per cent. In Europe, the Stoxx 600 rose 1 per cent, for a weekly gain of 1.1 per cent.
Asia-Pacific equities were mixed on Friday following a downbeat Thursday session in the US, when the S&P 500 closed down 0.2 per cent. Tokyo’s Topix index slipped 0.2 per cent. The Shanghai Composite eased back by 0.4 per cent.
Commodities
Oil prices pushed higher after seesawing through the week amid a continued focus on the outlook for global supply. Brent settled at $52.42 a barrel on Friday, up 0.8 per cent on the day but still down 0.2 per cent over the week.
The rebounding dollar and higher bond yields on Friday helped push gold down $9 to $1,258 an ounce, for a five-day decline of $11.
Additional reporting by Michael Hunter in London and Hudson Lockett in Hong Kong
For market updates and comment follow us on Twitter @FTMarkets
http://ift.tt/2vv4UfN
Tidak ada komentar:
Posting Komentar