Today has been by far the busiest day of the week in terms of the flow of economic news, especially on the domestic front.
By Peter Martin
Thursday, May 22, 2014
The pound has fallen against the dollar for the first time in six trading sessions after the latest estimate of first-quarter UK GDP failed to provide any surprises, coming in without revision at 0.8% growth quarter-on-quarter, for a yearly change of 3.1%. UK economic indicators have been so strong of late that GDP coming in as expected has been deemed as something of a disappointment; this, combined with a separate report showing UK public sector net borrowing climbing in April from £6.1 billion to £9.6 billion, has acted as a drag on the pound today, pulling GBP/USD down 0.27% to 1.6854.
The euro also weakened against the dollar today, slipping 0.28% to 1.3648 by early afternoon in New York, the shared currency still suffering from the earlier lackluster advance reading of this month’s eurozone manufacturing PMI, while the US equivalent beat forecasts. Markit’s flash reading for the US manufacturing PMI came in at 56.2 for May, surpassing the consensus estimate of 55.9, and up from April’s level of 55.4 (both mid-month and final) suggesting the pace of expansion is accelerating in the manufacturing sector. The strength being concentrated around new orders, which rose to 58.2, will boost hopes that momentum can be maintained into the summer.
Not all US economic data was so positive today, though, with a surprising weekly deterioration in the labor market revealed by a steep rise in initial jobless claims. We’ve previously seen two weeks of improvement in this report, but the number of claimants last week spiked to 326,000 from 298,000, though the number of continuing claims has continued to fall. Significantly, last week was the sample week for the Bureau of Labor Statistics’ employment situation report (the establishment survey in the BLS report, which yields the monthly non-farm payrolls data, relates to the pay period which includes the 12th of the month). The four-week moving average for initial claims is now 322,500, a slight improvement from the week prior but more than 10,000 above the four-week moving average for the sample week from April, which may serve to depress expectations for May’s employment report.
The Chicago Fed’s national activity index also showed some downbeat findings, sliding to -0.32 in April from March’s reading of +0.34, suggesting a notable slowdown in economic activity last month.
Despite these somewhat mixed economic releases, stocks have risen modestly in trading on Thursday, adding to the sharp rebound seen on Wednesday. By mid-afternoon in New York, the Dow Jones Industrial Average was up 0.14% or 23 points at 16,556, while the broader S&P 500 index advanced further, gaining 0.40% or 7.5 points to 1895.5. The NASDAQ 100 has fared the best out of the three leading benchmarks, climbing 0.58%, as Apple reached its highest price in a year (Apple is a component of both the S&P and the NASDAQ but not the DJIA).
Natural gas futures dropped into negative territory for the day, plunging in price after the EIA released its weekly natural gas report that showed gas in storage increasing by a net amount of 106 billion cubic feet. Despite some big increases in recent weeks, working gas in underground storage remains below the five-year moving average.
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