Jobless Report Surprises But Markets Slow To React

Jobless Report Surprises But Markets Slow To React

Today’s most significant piece of macroeconomic news was the release of jobless claims from last week.



Jobless Report Surprises But Markets Slow To React
Jobless Report Surprises But Markets Slow To React

The US jobless report showed a surprisingly large drop in the number of first-time claimants for unemployment insurance, with the level decreasing 32,000 to 300,000, the biggest fall in over a decade. This means the four-week moving average shifts down to 316,250 from 321,000 in the previous week, some 15,000 lower than we were seeing for this metric a month ago, and signals substantial improvement in employment.

Despite this upbeat sign, the US stock market has slumped today after two days of gains, with significant losses in the technology sector. By late morning in New York, the Dow Jones Industrial Average was down by 0.35% or 57 points at 16,380 and the S&P 500 index was off 0.77%, while the NASDAQ 100 took the biggest knock, tumbling 1.68% to 3540.0, with big falls in online bellwethers Google, Facebook, eBay and Amazon.

This bearish behaviour could be a sign of investor nerves as we head into the latest earnings season, with Google reporting next Wednesday and the others before the end of April. Bed, Bath and Beyond fell more than 6% after disappointing with its latest earnings,  but the selling of the momentum technology stocks also ties in with a general risk-off sentiment that has pervaded the financial markets today following news earlier from the General Administration of Customs in Beijing that China’s imports were down 11% in March from a year earlier. This included imports of crude oil falling to a five-month low, significant because China is the world’s biggest consumer of energy.  US light crude oil futures fell 0.36% today.

We have heard quite a bit from the major central banks from around the globe in the last week, with European Central Bank (ECB) President Mario Draghi’s punchy comments last Thursday followed this by the Bank of Japan opting for a steady-as-she-goes approach to both policy and stimulus earlier this week and the same result on Thursday from Governor Mark Carney and the Bank of England. The Bank of England’s Monetary Policy Committee (MPC) left its benchmark Bank Rate at a record low of 0.5% and kept its quantitative easing program on hold at £375 billion, as had been widely forecast. Though there have been signs that the rate of economic improvement in the UK is accelerating, with a report earlier this week showing UK industrial production rose faster than expected in February, the MPC has pledged to hold off from a  rate rise while unemployment remains above 7%. GBP/USD remained little changed following the announcement, and by late morning in New York was down by just 0.07%.

On Wednesday we also heard from the Federal Reserve in the form of the minutes from the last Federal Open Market Committee (FOMC) meeting.  There were no real surprises in the minutes, with the committee saying that future reductions in the rate of asset purchases are likely should the economy continue to develop as anticipated and that the decision to replace the existing quantitative thresholds in the central bank’s forward guidance with a more conventional, qualitative means of determining whether to change the federal funds rate was made unanimously. 


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