06.10.2023 – Puzzling over a possible Bank of Japan intervention: just now, the consumptive and otherwise rather sluggish yen made some interesting twitches.
It’s getting exciting again: Wall Street is waiting for the non-farm payrolls. If the labor market overheats, the chances of another rate hike will increase by December at the latest. And vice versa.
Before today’s data came in, the market was rather skeptical. Here’s the daily chart of the Dow Jones. That’s no surprise, as the economy is certainly showing signs of robustness – which argues for continued high interest rates or even further hikes.
Source: Bernstein Bank GmbH
Only a weak report from the jobs market is likely to slow the Fed’s tightening. That would be bullish for equities as a result. The dollar should then weaken. And vice versa. An ambiguous picture is likely to lead to wild swings that traders can make good use of.
These are the forecasts
But the market does not expect a slump in the labor market for today’s numbers. According to the blog “Newsquawk”, according to analyst consensus, non-farm employment climbed again by 170,000 in September; this after an increase of 187,000 in August. Forecasts range from 90,000 to 256,000, according to the report, and the consensus is for the unemployment rate to ease from 3.8 to 3.7 percent – the range of forecasts is between 3.4 and 3.9 percent.
No sign of weakness
The latest figures also pointed to a robust economy. Weekly initial jobless claims in the U.S. rose less sharply than many analysts had expected – a hawkish sign for the Federal Reserve. High demand for labor is keeping wages high, and thus inflation high – something the Fed doesn’t like. According to “Barchart.com,” applications rose 2,000 to 207,000; most analysts had expected 210,000. Continuing claims unexpectedly slipped 1,000 to 1.664 million – forecasters had expected an average of 1.671 million.
At the same time, the U.S. trade balance in August illustrated that the deficit shrank more than expected to a three-year minimum – a positive signal for U.S. gross domestic product. And thus reassurance to the Fed that rising interest rates will not choke off the economy. Specifically, the deficit fell to $58.3 billion from $64.7 billion in June – expectations had been for $59.8 billion.
The dissenting voice
Last but not least, a small signal of hope for the bulls. Mary C. Daly, head of the San Francisco Fed known as Dove, said: “If we continue to see a cooling labor market and inflation heading back to our target, we can hold interest rates steady and let the effects of policy continue to work.” Which some wanted to see as a signal that the Fed is holding back on interest rates after all. After all, Fed decision-makers always know everything a little earlier than the rest of the world.
So we wish you happy number-crunching when looking at the real-time news. Whether long or short – Bernstein Bank wishes you successful trades and investments!
________________________________________________________________________________________________________________________________________________
The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7