Markets React To Jobs Weakness

Markets React To Jobs Weakness

The US dollar index, a measure of the dollar's strength against a basket of six other leading currencies, slipped 0.1% in early trading on Monday, reflecting dimming expectations for a Fed rate hike in 2015.



Markets React To Jobs Weakness
Markets React To Jobs Weakness

Friday's employment data came in so much lower than expected, that it would seem not only to rule out the chances of an October rate hike but also to dent seriously the liklihood of a move in December. Non-farm payroll growth of just 142,000 in September, versus an expected 203,000, was bad enough, but sharp downward revisions, totalling 59,000, to the previous two months suggest the labor market has been substantially weaker than we had previously been led to believe, with manufacturing a particular area of concern. Unchanged hourly earnings alongside a slide in the participation rate suggests the slack could be increasing rather than diminishing and therefore raises the question of how well the US economy could deal with less accommodative monetary policy.

The undeniable weakness of Friday's figures have, funnily enough, lent some support to the stock market, serving to remove some of the uncertainty regarding the Fed's actions and seemingly beckoning in an extended period of accommodation. Stocks finished higher on Friday and made further gains in early trading on Monday. Shortly after the opening in New York, the Dow Jones was up 96 points or 0.59% at 16,569, while the S&P 500 climbed 0.74% to 1966.1.

With manufacturing pressured in recent weeks, a state that was underline by the lowly levels shown in the widely-followed nationwide manufacturing surveys released last week by Markit and the ISM, it becomes even more essential that the non-manufacturing side of the economy performs strongly in order to help take up the slack. Two key economic release for Monday are for this segment, in the form of Markit's services PMI and the ISM non-manufacturing index (both for September). Markit's services PMI fell to 55.1 in September, down from 56.1 in August, though still well above the 50.0 demarkation point that separates contraction from expansion. The ISM report is released at 11.00am ET.

 

Crude oil made strong gains on Monday to consolidate Friday's price advance. US crude futures rose 1.7% to $46.30 a barrel after the Russian oil minister said at the weekend that Moscow was prepared to discuss the oil market with other oil producers, including OPEC, if a meeting was to be called. This raises the possibility of a reduction in output being agreed in order to redress the issue of a global oversupply of oil.


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