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Stocks head into the final hour with substantial losses, although the major equity averages have managed to hold steady above their lows for the day. For the week, though, the S&P 500 is flat.
Consumer credit data for May was just posted. A $5.1 billion increase for the month exceeded the $3.5 billion jump that had been broadly expected. It also marked the eighth straight period of growth in the series.
Nomura has gone short euros around current levels at $1.4250 and points 4 reasons for the play.
- Italy remains a problem;
- better news on the US fiscal front;
- ECB hikes may not be as certain going forward "based on weaker growth momentum and financial market tension;
- even if NFP was weak, we should see a bounce in US data in the next 1-2 months.
Nomura has a stop in place at $1.4550 and target below $1.4000.
JPM economist Michael Feroli revisits the weak June payroll data, says it has "not many positives." Some implications are "a Fed on extended hold, quite possibly for even longer than JPM's call for a first hike in early 2013".
The dollar dropped the most in a month against the yen after the government’s payrolls report showed employers added the fewest jobs in nine months and the unemployment rate increased to the highest level this year.
“This number is so horribly below what people expected,” said Boris Schlossberg at GFT Forex.
Payrolls expanded by 18,000 in June after a revised increase of 25,000 in the previous month, the Labor Department reported today. The median forecast of economists was for 105,000 more jobs. The unemployment rate unexpectedly increased to 9.2%.
President Barack Obama said today’s job report shows that ‘we still have a long way to go and a lot of work to do to give people the security and opportunity they deserve.”
The Canadian currency slid 0.4%. Rate earlier rose after the government reported that Canada’s employers added more jobs last month than economists forecast.
The euro headed for a 1.9% weekly drop versus the dollar, its biggest in almost a month.
“There’s a lot of concern about the Italian banks,” said Mark McCormick, a currency strategist at Brown Brothers Harriman & Co.. “This is something that’s weighing on the euro. It gets back to the heart of the euro-zone debt crisis.”
The European Central Bank signaled more interest-rate increases yesterday after raising the target lending rate by a quarter-percentage point to 1.50%.
Gold holds at $1542.25/oz (range $1525.15/$1545.30). Support comes at $1527.29 (61.8%), then - at 55-day moving average ($1520). The
initial target is the June 22 peak at $1557.75, with the life-time high of $1575.79 (seen May 2) is the neat target.
Oil prices have been on the retreat all session. The commodity came under pressure immediately after the June jobs report was posted. Oil prices were last quoted with a 2.5% loss at $96.20 per barrel.
USD/JPY holds in a tight Y80.60-70. On the downside bids at Y80.50 and Y80.45/40 (Y80.42 - 30 Jun low). On the topside offers at Y80.75/80 and Y80.85/90. The currency pair is trading mid-range Y80.65.
Stocks slipped some more in recent trade. Strength remains limited.
Financials and industrials continue to suffer the worst of this session's selling efforts. Sharp pressure has taken them down to losses of 1.7% and 1.5%, respectively.
Analysts at Goldman note that away from payrolls, "other data have shown better signs in recent weeks, including jobless claims, gasoline prices, and auto production. Nevertheless, the weak trend in payroll employment indicates some downside risk to our second half growth views."
- macro-imbalances growing again and deficits must be cut, but not by inflation;
- inflation could lead to protectionism.
U.S. stocks were set to drop at the opening bell Friday, after the monthly jobs report showed employers added just 18,000 positions in June.
The Labor Department released its monthly jobs report at 8:30 a.m. ET, and its 18,000 figure was a major disappointment. A CNNMoney survey of 27 economists had forecast an addition of 120,000 jobs in June.
June's unemployment rate held at 9.2%, the same as the upwardly revised rate in May. Economists had forecast a small drop to 9%.
Economy: May wholesale inventory figures are due shortly after the opening bell.
Late in the afternoon, the Federal Reserve will release its report on May consumer credit report.
Companies: Shares of JDS Uniphase (JDSU) fell 3.6% in premarket trade after Piper Jaffray lowered its price target on the stock to $21 from $25.
World markets:
Oil for August delivery slipped $1.79 to $96.88 a barrel.
Gold futures for August delivery fell $1.50 to $1,529.10 an ounce.
Bonds: The price on the benchmark 10-year U.S. Treasury was flat, with the yield holding at 3.14%.
"June payrolls rose only 18K, well below the consensus, 105K. And the net revision was a hefty -44K. The unemployment rate rose a tenth to 9.2% - it was expected to be unch - and hourly earnings were flat, below the 0.2% consensus. This is a big bucket of very cold water." Still, they say "the details aren't quite as bad as the headline, with private payrolls up 57K, but that's still pretty terrible" - but they point out other data are improving so economy may be steadying.
The rate collapses on weak data dropping from Y81.47 to support at Y80.75/70. More bids seen at Y80.55/50, ahead of the channel base around Y80.35.
The euro declined, approaching a two- week low against the dollar, as a European Union document on bank stress tests deepened concern that the region’s debt crisis may intensify.
The euro also dropped against the yen as an internal EU document dated July 7 said banks that fail this year’s round of tests may need to present plans for making up their capital shortfall by the end of September. Governments should be ready to step in and help banks as a last resort, according to the preliminary document, which was prepared by government officials from the 27-nation region.
“It is the recognition that there will be more pressure on local governments to prop up their banking systems” that’s weakening the euro, said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “German Landesbanken and Spanish banks are considered the major pressure points.”
The pound fell to the lowest in more than a week against the dollar and gilts rallied as a measure of inflation slowed to the least since September, weakening the case for higher interest rates.
EUR/USD
Offers: $1.4280, $1.4300/10, $1.4330/35, $1.4400, $1.4420/30
Bids: $1.4220, $1.4200, $1.4170/65, $1.4150, $1.4125/20
Probes below $1.4280 as market react to reports that Italain bank UniCredit shares have been suspended limit down. Rate extends lows to support at $1.4265/60 ahead of $1.4230/20.
EUR/USD $1.4275, $1.4300, $1.4330, $1.4340, $1.4410, $1.4440
USD/JPY Y80.65, Y80.75, Y81.00, Y81.30(lge), Y82.00
EUR/JPY Y115.00, Y114.00
GBP/USD $1.6015, $1.5945, $1.5850
EUR/GBP stg0.8720
USD/CHF Chf0.8550
AUD/USD $1.0700, $1.0710, $1.0740, $1.0800, $1.0850, $1.0900
Extended highs through resistance at $1.5980/85 to $1.5987, but rate failed to hold gains and has eased back to $1.5977. Next resistance seen into $1.6000 with stronger interest between $1.6015/20. Support remains back at $1.5950 ahead of $1.5938/30.
Nikkei 10,138 +66.59 +0.66%
Hang Seng 22,687 +156.86 +0.70%
S&P/ASX 4,655 +49.18 +1.07%
Shanghai Composite 2,798 +3.51 +0.13%
The 17-member currency gained after Trichet said policy makers loosened collateral rules for Portuguese bonds to support local banks.
ECB policy makers increased the target lending rate by a quarter-percentage point.
The ECB waived some of its collateral rules to provide a lifeline to Greek banks a year ago. While banks can currently obtain as much money as they need from the ECB for up to three months against eligible assets, including government bonds, policy makers had said they may no longer accept Greek debt as collateral if the country defaults.
Suspending the collateral rules for Portugal “does show that the ECB is willing to maintain liquidity in the market, yet it does expose the ECB to risks should we see haircuts” on defaulted bonds, said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “They are trying to be ahead of the game if Portugal’s bonds receive a default rating.”
The dollar dropped against most of its major counterparts as U.S. companies added more workers in June than economists forecast, damping demand for haven assets before the government’s payrolls report tomorrow.
Companies added 157,000 workers last month, ADP Employer Services reported today, surpassing the 70,000 forecast by 36 economists in a Bloomberg News survey. Initial jobless claims fell by 14,000 to 418,000 in the week ended July 2, the Labor Department said today.
Nonfarm payrolls increased by 105,000 in June after an advance of 54,000 in the prior month, according to the median estimate of 83 economists in a Bloomberg News survey before tomorrow’s payrolls report from the Labor Department. The unemployment rate probably stayed at 9.1 percent.
The yen and Swiss franc were the biggest losers among major currencies as stocks and commodities rallied on U.S. employment reports, boosting demand for Brazil’s real and the Canadian dollar.
Resistance 3: Y82.20 (May 19, 24-25 high)
Resistance 3: Chf0.8520 (Jul 5 high)
Resistance 3: $ 1.6090 (Jul 6 high)
Resistance 3: $ 1.4470 (Jul 6 high)
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