10 November 2014
Ahead this week (high impact only)
# European stocks fell from a 5 week high, in the process posting a weekly drop, as bank shares slumped amid signs the region’s common supervisor is tightening scrutiny. Banks are a big part of the index and the sentiment surrounding them sent the Stoxx600 to a Friday close of -0.54% for a weekly loss of 0.46%. Meanwhile U.S. stocks inched to a new weekly record close after ‘goldilocks’ result from the monthly U.S payrolls report. The Dow rose 0.1%, and the S&P500 index inched up 0.03%,. Both indexes hit all-time closing highs for the third day in a row. It was the Dow's 22nd and the S&P's 38th closing high for the year. The Dow posted its biggest three-week percentage gain in three years.
# For the 9th consecutive month the U.S. economy created more than 200k jobs, amazingly its longest stretch of job creation since at least World War II. U.S. employers, which added 214,000 jobs to payrolls last month, on pace to post the best yearly gain in employment since 1999. The steady job growth has pushed the nation’s unemployment rate down to 5.8%. U.S. wage pressure rose marginally on the month to be right on the Fed’s target at 2.0%. The headline figures of +214k v 231k expected and wages a tick below the 2.1% expected had an outsized effect on the market with the USD falling 0.7% and U.S. 10 year note yields dropping from an intra-day high of 2.39 to 2.30% more likely a reflection of positioning rather than a fundamental sea change in sentiment.
# After weeks of relentless selling, Gold rose a hefty 2.4%, the biggest jump since June in a knee-jerk reaction to the miss in the headline jobs number. Commodities in general had a good night with WTI closing up nearly 1% as well.
# China’s trade data showcased a better than expected rise in exports but an underwhelming levels of imports. Worryingly however, the figures document a slowing in annual growth in both in October reinforcing signs of fragility in the world's second-largest economy that could prompt policymakers to roll out more stimulus measures. Exports have been the lone bright spot in the last few months, perhaps helping to offset soft domestic demand, but there are doubts about the accuracy of the official numbers amid signs of a resurgence of speculative currency flows through inflated trade receipts. Exports rose 11.6% in October from a year earlier, slowing from a 15.3% jump in September whilst imports rose 4.6% against an expected 5.5% rise.
#The IMF chief Lagarde told the market what they already know in saying that Europe’s current economic situation is fragile, brittle & fragmented.
# Plenty of U.S Fed speak on the wires too, the most notable comments Kocherlakota who said he sees “ long-run Fed Funds rate at 3.25%”, Evans who said “Labour market slack is definitely diminishing” and the boss herself who said had a go at government saying “lack of fiscal support has weakened U.S. & global economic recovery, Fiscal policy should ‘do no harm’ when Fed is trying to stimulate economy”.