Trading with point and figure

US August Labour report: mixed report likely to raise the temperature of the Fed's internal debate

a) Payrolls / Establishment survey - At 151K, with revisions to June (down 21K) and July (up 20K) cancelling each other out, and the relatively high probability that August will be revised up, this was broadly in line with expectations, particularly given the fact that 3-month average stands at 232K, which is way above the Fed's breakeven rate of 80-100K. The details showed particular weakness in Manufacturing (-14K) and Construction (-6K), the former echoing the ISM survey, while Government continues to show particular strength (+25K vs. July +50K).

b) Unemployment Rate / Household Report - Unemployment Rate slightly higher than expected at 4.9%, though this is primarily a function of the workforce growing by nearly 1.0 Mln in the past 3 months, which signals strength rather than weakness. U-6 Underemployment Rate still rather 'sticky' at 9.7%, though the number of long-term (>27 weeks) unemployed fell marginally on the month.

c) Average Weekly Hours - at 34.3 (following a downwardly revised 34.4) this was clearly disappointing, with the headline index down 0.2%, thanks to a very large drag from Manufacturing Hours which fell 0.6% m/m. The key question is whether this reflects seasonal shutdowns, which are rather less predictable these days, or renewed headwinds for the sector. Be that as it may, this does mean that Aug Industrial Production will be very weak.

d) Average Hourly Earnings - The slightly lower than expected 0.1% m/m 2.4% y/y (vs. expected 0.2% m/m 2.5%), with July revised up to a 7-year high of 2.7%, will doubtless be seized upon by the more dovish FOMC members as an argument for not acting 'in haste' on rates, though imagining that 25 bps will do much damage to either labour demand or growth is the stuff of paranoia. The underlying pace is in any case around trend for the year.

e) Market reaction - There was a flurry of activity and volatility in FX, Equity and Treasury futures, but ultimately this has left most markets little changed vs. levels ahead of the labour data (see charts), with the probability of a Sept Fed rate hike slipping to 28% from 34%. On balance this seems appropriate, in so far as the overall report for the month was mixed, but trend rates remain robust. Markets will be hoping for some guidance from Fed speakers (the hawkishly inclined Lacker this evening, Williams and Rosengren next week) and next Wednesday's Beige Book. But overall today's report is unlikely to change the views of either the hawks or the doves, though it does suggest that unless incoming data (mostly in the 12-16 September week) is especially weak or strong, then there will be rather more dissent at the September FOMC meeting.

..........................................................................

Marc Ostwald
Strategist
ADM Investor Services International
 
The Week Ahead - Bullet point highlights: 5 to 9 September 2016

- A relatively busy week for data kicks off with Services PMIs worldwide, and works through China CPI, PPI, FX Reserves and Trade Balance; Japan wages, revised Q2 GDP and Economy Watchers Survey; UK BRC Retail Sales, RICS House Prices, Industrial Production and Trade; German Factory Orders, Industrial Production and Trade; Australia Q2 GDP & Current Account; Canada Unemployment and what is a very light week for US statistics: JOLTS Job Openings and Wholesale Inventories.

- ECB tops busy week for central bank meetings, though as with the RBA, Bank of Canada, Riskbank, Bank of Korea and Poland's NBP, no changes in rates are expected. There is some speculation about some changes to the ECB's QE programme, with a widening of the corporate bond buying programme to include senior bank paper, a move away from the "Capital Key" for Govt bond purchases, the latter we consider to be highly improbable. A decision on extending the QE timeline will be deferred to Q4. The ECB's staff economic forecast update should keep forecasts unchanged, though the risks to the forecasts will continue to be emphasized as being to the downside.

- BoE's Carney, Cunliffe, Forbes and McCafferty will testify to the Treasury Select Committee on the Q3 Inflation Report, and seem likely to be on the receiving end of some quite awkward questions about their policy measures and the BoE's forecasts.

- There are a few Fed speakers during the week, and the Fed will publish its Beige Book for the Sept 20/21 FOMC meeting.

- The G-20 meeting outturn will need to be digested, as will the results of the state election in Germany. There are meetings of the Eurogroup, and an ASEAN meeting, to be attended by all TIPP country leaders.

- Government bond supply is relatively light: the UK sells 10-yr Gilt, German also sells 10-yr Bund and 10-yr Inflation-linked, Austria offers 7 & 10-yr Bunds, and Ireland will sell a long-dated bond. There is no coupon supply from the US, while Japan offers 5- and 30-yr JGBs.

..........................................................................

Marc Ostwald
Strategist
ADM Investor Services International
 
dentist007 said:
dow over last 24 hours


25gdmyx.gif
Click to expand...
18464 gotcha..excellent
stops tightened
 
bulls will need to find some support in that minor downtrend sad try and take out rez...otherwise we keep drifting down
 
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