Wall Street took a hard fall on Friday, with the S&P 500 recording its worst weekly loss since June 2012, as momentum from the prior day’s rout remained in play. Asian equity markets started the week mixed following weak economic data from the world’s two largest economies. On Friday the US nonfarm payroll report surprised traders and saw an immediate decline in the US dollar but once traders had a few minutes to evaluate the entire report, it was not as bad as it seemed and in fact many viewed it on a positive note. The US economy only created 203k against expectation of 233k but the two prior months was significant upward revisions and actually increased the quarterly average which is much more important than a single release. Data showed that the US had steadily increased the number of jobs well over the average of 200k per month. At the same time, most economists don’t think the pace of job growth is enough to cause the Federal Reserve to speed up its timetable for raising interest rates. Most still think the Fed will start raising rates to ward off inflation around mid-2015.
The Labor Department’s jobs report Friday pointed to an economy that has bounced back with force after a grim start to the year and is expected to sustain its strength into 2015.
“There is no doubt that the economy and the labor market have been strengthening,” said Sung Won Sown, an economist at California State University’s Smith School of Business. “People are rejoining the labor force. All these factors point to moderate, but sustained, economic growth in 2014.”
Speaking with reporters Friday afternoon, President Barack Obama declared that the economy “is clearly getting stronger. . . . Our engines are revving a little bit louder.”
The US Dollar is in the green to start of the new week at 81.41. There isn’t much data due today and the dollar will most likely remain on course, while the euro continues to show weakness. The euro was 0.4 percent from its lowest level versus the dollar since November as investors held the largest position in two years betting on a drop in the currency before the region’s central bank meets this week. Theeuro is trading at 1.3424 down by 5 pips on Monday morning. Portugal’s central bank took control of Banco Espirito Santo SA, once the country’s largest lender by market value, in a 4.9 billion-euro ($6.6 billion) bailout that will leave junior bondholders with losses. The Bank of Portugal’s Resolution Fund will move Banco Espirito Santo’s deposit-taking operations and most of its assets to a new company, Novo Banco, which it will own outright. The fund will finance the rescue with a Treasury loan to be repaid by Novo Banco’s eventual sale.
The most action this morning has been in Australia after Aussie retail sales beat expectations and also saw an upward revision to last month’s lackluster release. The Aussie climbed to trade at 0.9323 adding 9 points. Gains were limited after Sunday’s release of Chinese nonmanufacturing PMI which missed expectations. Business activity in China’s non-manufacturing sector slightly slowed in July, an official monthly survey showed. The Purchasing Managers Index of the non-manufacturing sector came in at 54.2 percent in July, down 0.8 percentage points from June, according to a report jointly released by the National Bureau of Statistics and the China Federation of Logistics and Purchasing. Remaining in the Asian region, the kiwi is trading at 0.8513 with little activity this morning while the Japanese yen continues to weaken against its crosses. Against the US dollar it is trading at 102.65 and against the weak euro at 137.79 as traders continue to worry about the lack of progress by Abenomics, the possible addition of stimulus by the Bank of Japan and the low wage growth numbers which will all weigh on 2nd quarter GDP.