Monday 23 October 2017

Daily Market Update: US payrolls come in well ahead of expectations

The Arlington Memorial Bridge, Washington. AP Photo/Andrew Harnik)
The Arlington Memorial Bridge, Washington. AP Photo/Andrew Harnik)

John Barry

US Non farm payrolls were well ahead of expectations on Friday, with the US Labour Department announcing that 242,000 jobs were created last month.

The unemployment rate held steady at an eight-year low of 4.9 percent. There was also an upward revision for December and January of 30,000 additional jobs. Economists had forecast employment increasing by 190,000 last month. The majority of the gains came in the health care and retail sectors. Despite the strong headline number, the closely watched average hourly wages actually declined for the month, falling 3 cents.

The average hourly work week also fell 0.2 hours to 34.4. Traders are assigning a 2 percent chance to a March rate hike, with December being the first month priced in as having a greater than 50% chance of higher rates. Members of the Federal Open Market Committee had indicated in November that four rate hikes would be likely this year.

US stock markets were higher on the back of the data with the Dow Jones rising above 17,000 for the first time since January 6th, closing at 17,006, a gain of 0.4%. The broader based Standard and Poor’s 500 gained 0.3% to 1999. The S and P is now down 2.15% year to date, after being off by more than 10 lower on Feb 11.

US trade data was also released on Friday, with the Trade deficit rising in January as American exports fell for a fourth straight month. The gap between exports and imports climbed to USD 45.7 billion (imports greater) from a revised USD 44.7 billion in December.

Following on from the positive US news, Asian shares hit two month highs overnight. Chinese markets edged higher after Prime Minister Li Keqiang on Saturday spelled out a new five-year economic plan.

European equity markets have opened lower despite the jobs data, as investors focus on the European Central Bank (ECB) meeting this week. In early trading, the pan-European STOXX 600 Index was down 0.3 percent. Investors are considering whether the ECB will cut its negative deposit rate further and/or extend the level and/or tenor of quantitative easing, or even introduce some other form of stimulus. Early this morning, weaker domestic demand drove a dip in German industrial orders in January but a strong rise in bookings from other euro zone countries cushioned the fall according to the data.

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