Following yesterday’s impressive stock rally that saw the S&P 500 up over 1% on hopes of a Greek debt deal, Thursday's upbeat economic reports should provide further encouragement to investors.
By Peter Martin
Thursday, June 11, 2015
Jobless claims crept up last week, but the level remains historically low and continues to paint a picture of a healthy jobs market in the US. Initial claims rose 2000 to 279,000, which nudges the four-week moving average up to 278,750 from a prior level of 275,000. Next week’s jobless claims data falls within the sample week used by the BLS for its monthly employment report, and heading into that crucial period, the labor market appears to be in a holding pattern, albeit a healthy one, where the inertia working against improvement is just how low claims have already fallen.
Retail sales was probably the highlight of Thursday’s US economic releases — perhaps even of the whole week — and the result revealed in the report suggests consumers were more active in May than we have seen in previous months. Retails sales jumped 1.2% last month, accelerating from 0.2% in April (originally reported as flat, but revised higher in today’s report). Auto sales led the way with a 2.0% jump, but even stripping out this component, retail sales were still a healthy 1.0% higher.
A bounce back from the first quarter’s doldrums failed to materialise in April, but the rebound appears to have finally arrived in May, a notion reinforced by signs of inflation warming up. Import prices climbed 1.3% last month, following a 0.3% decline in April, while export prices rose 0.6% after a 0.7% fall in the month prior. This is the first month in a long time in which we have seen any sign of inflationary pressures in import and export prices and though prices are still well down year-on-year (import prices are a marked 9.6% lower and export prices 5.9%), a continuation of the upward trend could give the Fed the ammunition they need alongside the healthy jobs market to properly contemplate hiking rates.
That has given a boost to the US dollar this morning, helping it to strengthen against most of its commonly-traded peers. USD/CAD gained 0.43% to 1.2306, GBP/USD dropped 0.38% to 1.5470, while EUR/USD at 1.1214 was down close to 1%.
The euro’s decline came despite indications that a deal to help Greece with its debt problems could be at hand. EU Commissioner Pierre Moscovici said an agreement was close, though Bundesbank President Jens Weidmann warned of the time pressures involved. ‘There is a strong determination to help Greece,’ Mr Weidmann said in a speech today, ‘But time is running out, and the risk of insolvency is increasing by the day.’
The strength of the day’s US economic data contributed to a rise in stock prices in early trading on Wall Street. Shortly after the open in New York, the Dow Jones was up 66 points or 0.37% at 18,067, with the S&P 500 Index not far behind with a gain of 0.28%.
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