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.
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!
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