A mixed-bag US jobs report on Friday saw markets end a rough week on a cautious note. Nonfarm payrolls fell 125k in June, in line with consensus as the Government shed 225k temporary workers for the 2010 census. The key private jobs number rose 83k, below economists expectations for an 110k gain but not as bad as markets feared after the slew of negative data this week.
Other detail included a disappointing fall in both hourly earnings and the workweek but a lower unemployment rate, from 9.7% to 9.5%. Stocks opened on a weak note with the Dow down 130pts at one stage. Stocks pared their losses into the US long weekend leaving the Dow down 46pts (-0.5%) for the day.
For the week the Dow shed 4.45%. US Treasury yields fell 4bp to 2.91% in the wake of the US jobs report but reversed course and fi nished the day 3bp higher, not completely surprising given US 10yr Treasury yields have already seen a mighty 50bp decline over the last month. Crude oil fell 70c to $72.50/bbl extending losses for the week to $7/bbl. Gold rose $12.70 to $1211.60/oz to fi nish the week down $45.
The USD was marked lower against EUR after the US jobs report extending a nascent trend that has seen the USD give ground on deteriorating fundamentals lately. EUR/USD rose from just below 1.25 ahead of the jobs report to just over 1.26 and settled at 1.2565 on the close.
AUD and NZD remained on the backfoot though. AUD began offshore trading in a better mood around 0.8450 following earlier news that the Australian Government and major mining companies agreed to a watered down mining tax but drifted lower as offshore trading progressed. The AUD tested lows just above 0.8400 in NY and fi nished the session at 0.8417.
The NZD saw highs near 0.6970 but slid US1 cent to lows near 0.6684 in afternoon NY trading. AUD underperformed NZD over the week and the cross hit 6 week lows near 1.2140 on Friday before rebounding to 1.2225 into the close.
US Non-farm payrolls came in broadly in line with consensus falling 125k in June. Private payrolls increased by 83k from 33k previously. It was the large drop in the unemployment rate that grabbed the headlines with a fall to 9.5% from 9.7% - the lowest since July 2009. This was driven, however, by a fall in household employment by 301k i.e. people leaving the workforce. Overall, not a hugely positive release and the further slowdown in average earnings to 1.7% suggests uncomfortably low CPI and PCE infl ation in the coming months.
US factory orders contracted 1.4% during May following eight consecutive months of positive growth. Excluding transportation, orders were down 0.6%. Shipments were 0.6% lower and inventories gained 0.8%. This report helps to explain the drop in the June ISM manufacturing survey released earlier this week and adds to the evidence that the US manufacturing sector may be starting to cool after a solid performance in the fi rst half of this year.
Euroland unemployment was steady at 10.0% in May at its highest level since August 1998. Also released in the Eurozone were producer price data for May which were in line with market expectations at 0.3% on the month and 3.1%yr.
Outlook
AUD/USD and NZD/USD outlook next 24 hours: The AUD and NZD start the week on the backfoot on continuing global growth worries. The 4th of July US long weekend though will likely keep markets ultimately rangebound. AUD/USD will run into sellers around USD0.8500 while NZD/USD will meet resistance into 0.6965 on the day.
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