Morten Lund, an analyst at Nordea Markets, notes that the U.S. Nonfarm payrolls rose by 136k in September, underperforming consensus expectations, and suggests that overall, the report was a mixed bag.
Business School Purchasing Managers Index (PMI), measuring Canada’s economic
activity, fell to 60.6 in September from an unrevised 48.7 in August. That was
the lowest reading since March 2015.
Economists had expected the gauge to hit 54.3.
A figure above 50 shows an increase while below 50 shows a decrease.
Within sub-indexes, the inventories indicator fell to 50.5 in September from 54.8 in the prior month and the employment measure dropped to 49.6 from 52.7, while the supplier deliveries gauge rose to 50.2 this month from 49.9 in August and the prices index surged to 56.9 from 51.3.
Rannella Billy-Ochieng’, an economist at the Royal Bank of Canada (RBC), notes that Canada's trade deficit narrowed to $1B in August up from a revised $1.4B deficit in July.
Canada announced on Friday that Canada’s merchandise trade deficit stood at CAD0.96
billion in August, narrowing from a revised CAD1.38 billion gap in July (originally
a CAD1.12-billion gap).
Economists had expected a deficit of CAD1.00 billion.
According to the report, the country’s exports rose 1.8 percent m-o-m in August, due mainly to a gain in exports of energy products (+3.9 percent m-o-m) and aircraft (+38.7 percent m-o-m). Meanwhile, imports increased 1.0 percent m-o-m in August, mostly on higher imports of non-metallic mineral products (+9.4 percent m-o-m) and energy products (+9.7 percent m-o-m).
Nathan Janzen, the senior economist at the Royal Bank of Canada (RBC) notes that U.S. September labour market report was a mixed bag, but wasn’t as bad as might have been feared after softer-than-expected ISM manufacturing and non-manufacturing reports this week raised concerns about the health of the underlying growth backdrop.
U.S. stock-index futures rose moderately on Friday after the release of the September jobs report, which revealed a moderate increase in job growth and the unemployment rate at 50-year low, diminishing worries of a sharp slowdown in the world’s largest economy.
Today's Change, points
Today's Change, %
(company / ticker / price / change ($/%) / volume)
ALTRIA GROUP INC.
Amazon.com Inc., NASDAQ
Citigroup Inc., NYSE
Exxon Mobil Corp
FedEx Corporation, NYSE
Ford Motor Co.
Freeport-McMoRan Copper & Gold Inc., NYSE
General Electric Co
General Motors Company, NYSE
Home Depot Inc
International Business Machines Co...
Johnson & Johnson
JPMorgan Chase and Co
Merck & Co Inc
Procter & Gamble Co
Starbucks Corporation, NASDAQ
Tesla Motors, Inc., NASDAQ
The Coca-Cola Co
Twitter, Inc., NYSE
United Technologies Corp
Verizon Communications Inc
Wal-Mart Stores Inc
Walt Disney Co
Yandex N.V., NASDAQ
Commerce Department reported on Wednesday U.S. the goods and services trade
deficit widened to $54.9 billion in August from an unrevised $54.0 billion in the
Economists had expected a deficit of $54.5 billion.
According to the report, the August increase in the goods and services deficit reflected a gain in the goods deficit of $0.8 billion to $74.4 billion and a decline in the services surplus of less than $0.1 billion to $19.5 billion.
Exports of goods and services from the U.S. rose 0.2 percent m-o-m to $ 207.9 billion in August, while imports increased 0.5 percent m-o-m to $262.8 billion.
Year-to-date, the goods and services deficit surged 7.1 percent from the same period in 2018. Exports fell 0.2 percent, while imports rose 1.2 percent.
Barrick (GOLD) initiated with Outperform at National Bank Financial
HP (HPQ) downgraded to Hold from Buy at Loop Capital; target lowered to $19
Snap (SNAP) upgraded to Equal-Weight from Underweight at Morgan Stanley; target raised to $17
The U.S. Labor
Department announced on Friday that nonfarm payrolls increased by 136,000 in
September after an upwardly revised 168,000 gain in the prior month (originally
an increase of 130,000).
According to the report, employment rose in health care (+39,000 jobs), professional and business services (+34,000) and transportation and warehousing (+16,000). Employment in government also continued on an upward trend in September (+22,000). Meanwhile, retail trade employment edged down in September (-11,000). Employment in other major industries, including mining, construction, manufacturing, wholesale trade, information, financial activities, and leisure and hospitality, showed little change over the month.
The unemployment rate fell to 3.5 percent in September from 3.7 percent in August. That was the lowest level since December 1969.
Economists had forecast 145,000 new jobs and the jobless rate to stay at 3.7 percent.
The labor force participation rate was unchanged m-o-m at 63.2 percent in September, while hourly earnings for private-sector workers were little-changed m-o-m (-1 cent) at $28.09, following an unrevised 0.4 percent m-o-m gain in August. Economists had forecast a 0.3 percent m-o-m advance in the average hourly earnings. Over the year, average hourly earnings have increased by 2.9 percent, following an unrevised 3.2 percent rise in August.
The average workweek remained unchanged at 34.4 hours in September, matching economists’ forecast.
Analysts at TD Securities are expecting Canada’s international merchandise trade deficit to deteriorate to $1.50bn in August from $1.12bn, slightly below the market consensus for $1.20bn.
Bill Diviney, the senior economist at ABN AMRO, notes that the U.S. ISM Nonmanufacturing Index (NMI) declined to a three-year low of 52.6 in September, down from 56.4 in August, and well below ABN AMRO’s (54.5) and consensus (55.0) estimates.
Analysts at TD Securities are expecting the U.S. Nonfarm Payrolls to increase by 150k in September, following the below-consensus 130k August print.
Aline Schuiling, the senior economist at ABN AMRO, notes that the volume of retail sales in the eurozone increased by 0.3% mom in August, following a 0.5% drop the month before.
Danske Bank's analysts think the global economy is at a precarious moment with OECD leading indicators pointing towards further downside, but PMI new orders actually picking up, driven partly by China and stabilizing world trade growth.
The Federal Reserve has more ammunition to fight the next recession than many people think, according to a former leader of the U.S. central bank.
Much has been made by the fact that the Fed historically has been able to cut interest rates by about 5-and-a-half percentage points to revive the economy after a recession.
There is concern in the era of low interest rates. The Fed’s benchmark interest rate is now set in a range between 1.75% and 2%, giving them relatively less space to operate.
All is not lost, according to Ben Bernanke, who led the Fed through the aftermath of the Great Recession.
He estimate the Fed’s so-called unconventional policies, if used wisely, are the equivalent of 3 percentage point of interest rate cuts.
Those policies are forward guidance, bond buying, commonly called quantitative easing, and a new policy-framework that includes a “makeup strategy” for inflation, he said.
“So my sense is as long as nominal neutral rates are 2.5%-3%, that the Fed will be able to do most of what it could do at any point in history,” he said.
If the neutral rate does sink further, the Fed could be in a “difficult situation,” he said.
MUFG Research discusses EUR/USD tactical outlook and adopts a neutral bias expects the pair to maintain its recent 1.08-1.11 range in the near-term.
"One key event for EUR/USD in the week ahead will of course be the payrolls report from the US. The euro has rallied modestly on the back of the weaker than expected ISM Manufacturing print and if that weakness was evident in the jobs report tomorrow, it would likely prompt a further rally for EUR/USD. Talks next week between the US and China will probably be the key macro event of the week but we are sceptical of this providing a catalyst for any notable shift in sentiment and trade uncertainties are set to persist..With the euro-zone calendar very light next week, we expect a relatively narrow trading rang," MUFG adds.
Nick Kounis, head of financial markets research at ABN AMRO, points out that the ECB officials that backed the central bank’s stimulus package warned of the growing risks to the economic outlook.
“Ignazio Visco, the Governor of the central bank of Italy, said that ‘the economic situation is worse than we imagine and therefore we cannot risk losing control of inflation expectations’. Meanwhile, Olli Rehn, Governor of the central bank of Finland asserted that the ECB ‘should take care to avoid the sort of harmful equilibrium that arises from prolonged low inflation and zero interest rates, as this would significantly constrain the capacity for monetary policy to balance the economic cycle’. He added that the inflation outlook is very subdued and that the medium-term inflation rate is seen clearly below the ECB target. Finally, Luis de Guindos, ECB Vice President said that risks are tilted to the downside and noted that the ‘level of economic activity in the euro area remains disappointingly low’. These dire warnings come against the background of weakening economic data on both sides of the Atlantic. At the same time, market-based measures of inflation expectations have fallen further. We continue to expect the ECB to step up the pace of monetary stimulus in the coming months.”
Danske Bank analysts suggest that in another sign that the global economic slowdown is making its mark on the US economy, yesterday it became blindingly obvious that the service sector cannot go unabated amid a widespread manufacturing slump.
“European PMIs came out on the soft side throughout the day, but it was notably a very weak US non-manufacturing ISM that made markets react more profoundly. The headline dropped to 52.6 (from 56.4 last), a 3Y low, as not least, new orders and the employment sub-index witnessed big declines. Taken together, this week's ISM reports now signals US growth of a mere 1% q/q (ar). This adds further support to our call for another Fed cut later this month, even if the Fed's Clarida yesterday reiterated that it is one meeting at a time and that the US economy is in a 'good place'.”
According to figures released today by the Society of Motor Manufacturers and Traders (SMMT), the UK new car market declined by 2.5% in the first three quarters of the year. September saw modest year-on-year growth following a substantial -20.5% decline in the same month in 2018, when new emissions regulations and lack of testing capacity across Europe affected supply.
The growth, representing some 4,421 units, was not enough to recover losses of over 87,000 in last year’s important plate-change month, however, leaving the year-to-date market trailing some 49,000 units behind this time in 2018. It is also in stark contrast to other major European markets, which this September rallied in double digits.
September’s volumes were driven by the fleet sector, which grew 8.6%. Meanwhile, private demand remained stable, up 0.1%, while business registrations declined -44.8%. Diesel registrations fell -20.3%, as petrols experienced a moderate increase of 4.5%.
There was good news for battery electric cars (BEVs), which saw the biggest percentage growth of all fuel types, up 236.4% (5,414 units) as new models boosted registrations.
The European Union is likely to take retaliatory measures in response to new U.S. tariffs on European goods, German Foreign Minister Heiko Maas told.
"The European Union now will have to react and, after obtaining the approval of the World Trade Organisation, probably impose punitive tariffs as well," Maas, a member of Germany's co-governing Social Democrats, told the Funke newspaper group.
"Europe is united on this question. We remain ready to negotiate common rules for subsidies in the aviation industry. We can still prevent further damage." Maas added.
The WTO this week ruled that some subsidies EU states paid to planemaker Airbus were illegal, giving the United States the right to react with tariffs on goods imported from the EU.
September data from IHS Markit pointed to a renewed increase in activity across the eurozone construction sector. The expansion was supported by another rise in staff numbers, although new orders continued to fall. Meanwhile, purchasing activity grew at a slightly faster rate than in August and sentiment towards the business outlook improved. On the cost front, input prices continued to rise markedly, but the rate of inflation remained in line with August's 34 month low.
Up from 49.1 in August, at 50.5 in September, the Eurozone Construction PMI signalled a slight rebound in building activity. The result was driven by further growth in France, and stable trends in Germany and Italy. Of the three monitored sub-sectors, commercial was the strongest-performing category, posting a marginal rise. On the other hand, there were further contractions recorded at both home builders and civil engineers. Notably, the reduction in work undertaken on infrastructure projects was the quickest for four months.
Building companies in the eurozone were optimistic towards the 12 month business outlook in September. Moreover, the degree of positivity was stronger than in the previous survey period and historically elevated. Within the so-called 'big-three', confidence was highest among Italian firms.
British business activity wilted in the third quarter, especially in manufacturing, according to a survey on Friday that boded poorly for the country's economy in late 2019 as it faces the Brexit crisis and a global slowdown.
The British Chambers of Commerce's (BCC) survey of 6,600 companies showed domestic manufacturing sales fell at the fastest pace since late 2011. Growth in the much larger services sector also slowed.
Overall, the survey chimed with other signs of a sharp deterioration in business confidence in Britain as the Oct. 31 Brexit deadline nears with little clarity on how or if the country will leave the EU.
The BCC survey also pointed to the biggest drop in manufacturing export orders in 10 years.
"Our findings point to a worrying drop-off in UK economic activity, with unrelenting uncertainty over Brexit and a notable slowing in global growth prospects dragging down almost all the key indicators in the quarter," BCC head of economics Suren Thiru said.
"Looking forward, weakening orders, confidence and investment intentions suggest that unless action is taken the UK's current weak growth trajectory could drift markedly lower over the near term."
The United States will talk to the European Union before adopting its trade tariffs on European goods, the U.S. Secretary of State Mike Pompeo said in a video interview posted on daily La Stampa website on Friday.
“We will certainly talk to the EU... We will do our best to accommodate each country,” Pompeo said in the video interview.
But he said it was “definitely an unfair trading relationship”.
The U.S. on Wednesday said it would slap 10% tariffs on European-made Airbus planes and 25% duties on French wine, Scotch and Irish whiskies, and cheese from across the continent.
Danske Bank analysts point out that today, it is the day of the jobs report in the US and they expect non-farm payrolls to have grown by 100,000 in September, which is below the Bloomberg consensus of 140,000.
“While the non-farm figure tends to be volatile, the employment indices in the Markit PMI and the ISM reports do not look encouraging (and actually signal that jobs growth was even lower than our expectation of 100,000). A weak jobs report will likely add fuel to the repricing of the Fed seen this week. Today also provides the opportunity to listen to Fed comments from Rosengren, Botstic and Powell, who are scheduled to speak. Powell is only making opening remarks at a "Fed Listen" event though, so we would not get our hopes up too high that he will give out new monetary-policy signals.”
With the European Union appearing lukewarm toward U.K. Prime Minister Boris Johnson’s latest Brexit proposal, the deadline for Britain to leave the bloc could once again be pushed back, according to a British lawmaker.
The U.K. currently has until Oct. 31 to leave the EU. Britain’s departure has been pushed back multiple times from the original March 29 deadline, after British members of parliament thrice rejected former Prime Minister Theresa May’s withdrawal agreement.
If the EU doesn’t agree to Johnson’s proposal, it would have to once again delay the U.K.’s departure to avoid a no-deal Brexit, said Jitesh Gadhia, a member of the House of Lords, the upper chamber of the British parliament.
“If you think about it from the EU perspective and if you look at their choices: Do you seal a deal with Prime Minister Johnson now or do you actually roll the dice on an extension and election hoping that you might have a more favorable counterparty?” Gadhia told CNBC.
He said even though “the omens aren’t great” on getting the EU to agree to Johnson’s deal, the bloc still appeared to be open to further negotiations.
Analysts at TD Securities note that the RBA published its semi-annual Financial Stability Review today and it acknowledged a greater chance of weaker growth.
“Risks revolving around from external shocks (trade and financial links), high household debt (could curtain consumption) and housing (further out risk of rapid growth in prices given low supply but growth in population). Nonetheless the RBA believes the Australian banking system is resilient to downside risks with Banks holding adequate levels of capital/ liquid assets and implementing Loss Absorbing Capacity with APRA’s direction. Given the ability to withstand these shocks, the RBA warned lenders not to be too strict when assessing borrowers as this could dent economic activity.”
Japanese Prime Minister Shinzo Abe pledged to deliver "all possible steps" if risks to the economy intensified, signalling a fiscal-stimulus boost in the event this month's sales tax hike triggers a sharp downturn in growth.
The government rolled out a twice-delayed rise in the sales tax to 10% from 8% on Tuesday, a move that is seen as critical for fixing the country's tattered finances. But there are fears the higher tax could hurt consumer spending and tip the economy into recession.
This has led to speculation that Tokyo will step up fiscal spending, though it has already taken measures to mitigate the pain on consumption, mindful of the severe economic downturn that followed the last increase in the sales tax in 2014.
"Achieving economic growth remains my administration's top priority," Abe said in a speech delivered to an extraordinary parliament session.
"If downside risks materialise, we will take all possible steps flexibly and without hesitation to ensure the economy is on a growth path," he said.
Resistance levels (open interest**, contracts)
Price at time of writing this review: $1.0972
Support levels (open interest**, contracts):
- Overall open interest on the CALL options and PUT options with the expiration date October, 4 is 91226 contracts (according to data from October, 3) with the maximum number of contracts with strike price $1,1100 (4452);
Resistance levels (open interest**, contracts)
Price at time of writing this review: $1.2345
Support levels (open interest**, contracts):
- Overall open interest on the CALL options with the expiration date October, 4 is 17893 contracts, with the maximum number of contracts with strike price $1,2550 (1533);
- Overall open interest on the PUT options with the expiration date October, 4 is 20620 contracts, with the maximum number of contracts with strike price $1,1900 (1313);
- The ratio of PUT/CALL was 1.15 versus 1.12 from the previous trading day according to data from October, 3
* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.
** - Open interest takes into account the total number of option contracts that are open at the moment.
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