Markets Daily Top Three
1. Dollar rebounds as Payrolls surge beating forecasts
The US employment report on Friday showed that headline payrolls rose +255k in July, well above the expected +180k. Net upward revisions to the prior two months were +18k. The unemployment rate held steady at 4.9% and average hourly earnings growth was +0.3% month on month versus expected 0.2%. Last month’s strong +287k print was also revised up marginally to 292k. The past two strong prints bring the 3 month average back up to around +200k which is in line with the 12 month average. Equities and the dollar moved higher on the number but the bulk of the moves were done before London went home. The S&P 500 and NASDAQ closed at all-time highs with the Dow not too far from there. The dollar made gains against the pound pushing GBPUSD to a low of 1.3022 and EURUSD, 1.1046.
2. Mixed China data over the weekend, as imports drop and exports remained subdued.
China foreign reserves data came out more or less in line with expectations over the weekend edging down only $4bn in July and bringing the outstanding value to $3.201tn, trade balance came out better this morning but both imports and exports came out weaker than expected. July’s exports maintained a steady growth in yuan and volume terms but July’s exports stayed in mildly contractionary territory in USD terms, declining by 4.4% year on year. However, more worrisome is China’s imports, which dropped by 12.5%y/y in USD terms.
3. The week ahead in Economics
After the high drama of the BoE’s August policy decision this week’s data calendar is more mundane. The focus will probably be on the latest surveys for retail sales and the housing market, where there may be further declines. The official data releases – for industrial and construction output – are for June, so simply provide further detail as we already have preliminary Q2 GDP estimate. In the US, Friday again looks to be the key day for economic data releases with US retail sales forecasted to keep climbing in July for the fourth straight month following the strongest quarterly advance for consumer spending since the end of 2014. Events in Europe see second quarter GDP growth released in Germany alongside a revision to the already-released 2Q GDP estimate for the Euro-area (+0.3% quarter on quarter) on Friday. A revision to July CPI is also due in Germany.