Uneven Labour Data Disappoints as Jobless Rate Falls

Daily Analysis - 06/11/2017

S&P 500 Reaches Fresh Record as Technology Shares Help Offset Job Creation Data


A renewed spurt in Apple’s shares helped the S&P 500 set a fresh record on Friday, with the benchmark index closing out an eighth consecutive week of gains. However, weighing on the momentum was the latest employment report which highlighted job creation that failed to match forecasts despite the unemployment rate dipping modestly.

Mixed US Labour Report Fails to Dent Market Sentiment

Friday was a busy day Wall Street as the combination of earnings announcements and macroeconomic data shared the spotlight.  Data compiled by the Bureau of Labor Statistics indicated the US economy created 261,000 jobs in October, missing the consensus forecast of economists calling for an addition of 310,000 positions. The report also highlighted the jobless rate slipping to 4.10%, its lowest level in close to 17 years.

The investor reaction to the mixed set of figures was muted, with futures of all three major US equity benchmarks moving marginally higher following the release of the payroll figures. On the Federal Reserve front, Jerome H. Powell’s nomination for the Fed chair was widely anticipated. If confirmed, Powell would succeed Janet Yellen, whose term expires in February. S&P 500 futures were last seen trending flat around the 2580-mark after opening slightly lower on the session.


BoJ’s Kuroda Reiterates His Faith in Strengthening Economy

The Yen dived to a multi-month low against the US dollar overnight after Bank of Japan Governor Haruhiko Kuroda highlighted the distance remaining for the Central Bank to achieve the 2.00% inflation target. Kuroda noted that growth was gathering momentum and the expansion was sustainable given that it was broad-based. His remarks underscore the dominant view within the Central Bank that its ultra-easy monetary policy coupled with an accelerating economic recovery would be sufficient to lift inflation.

In other economic news from the country, the services sector grew at its fastest pace in two years in October amid a sharp rise in new orders.  Per the monthly Nikkei-Markit survey, the nation’s Services PMI climbed to 53.4 last month, marking its strongest reading since August of 2015 compared to the 51.0 reported in September. The USDJPY pair rallied as high as 114.750 in early Monday trade before pulling back below 114.500.


New Orders Boost UK Services Growth

A day after the Bank of England hiked interest rates for the first time in a decade, a widely-followed survey released on Friday showed that the British economy was in relatively good health. Financial information firm IHS Markit’s UK Services PMI advanced to 55.6 in October from 53.6 in September, its strongest reading since April and the biggest one-month gain since August of 2016.

The dominant services sector, which accounts for almost 80.00% of the British economy, saw new orders soar at the fastest rate since May. However, employment growth remained muted amidst an uncertain demand environment. The better than expected services reading follows a solid October manufacturing performance as well as last month’s construction sector resurgence. FTSE 100 futures finished Friday at 7525, and are trickling lower in Monday morning trade.


Canadian Trade Activity Falters

Canada’s trade deficit remained unchanged in September as exports and imports fell for the fourth straight month according to figures published by Statistics Canada on Friday. Exports and imports have never both contracted for four months in a row since foreign trade data was first compiled in 1946.

On a seasonally adjusted basis, the merchandise trade deficit stood at CAD$3.18 billion in September while the prior month’s shortfall was revised to CAD$3.18 billion from an earlier estimate of CAD$3.41 billion. Analysts surveyed by Reuters had projected a deficit of CAD$3.00 billion for the period. Exports slipped by 0.30% to CAD$43.56 billion in September while inbound shipments dipped by 0.30% to CAD$46.74 billion. USDCAD tumbled to a one-week trough on Friday following the release of data, with the pair currently hovering around 1.2770 after staging a modest rebound.


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