Market Update November 10

US non-farm payrolls growth undershot lofty expectations in October with an increase of 214k reported. The reading was below the upwardly-revised 256k pace of September and expectations for a gain of 235k and was the second-lowest increase of the past 6 months. Despite the miss on payrolls growth and an uptick in participation to 62.8%, the national unemployment rate fell to 5.8% from 5.9%, a level last seen in July 2008. Keeping with the established theme, the rest of the release was ok without being outstanding with hourly wages ticking up 0.1%, below expectations for a gain of 0.2%, while the underemployment rate slid to 11.5% from 11.8%, a level last seen in September 2008. The employment-to-population ratio rose by 0.2% to 59.2%, some 1.0% above the level of a year earlier, while the number of persons employed part time for economic reasons fell by 76k to 7.027m. Elsewhere the average work week ticked up to 34.6 hours, the highest level seen since May 2008 and a good sign for hiring prospects ahead, while the separate household survey logged an increase in employment of 683k, the largest gain seen this year.

US consumer credit continued to expand in September, albeit at a far slower pace than what was seen earlier in the year, with an increase of $15.924b reported. The reading was higher than the $14.03b increase of August and in line with expectations for a gain of $16b. Non-revolving credit, largely auto and student loans, jumped by $14.5b, outpacing a $1.4b expansion in revolving credit.

China’s trade surplus ballooned yet again in October with an increase to $45.41b reported. The reading was higher than the $30.96b surplus of September and expectations for an increase to $42b with exports, up 11.6% on year, outpacing a 4.6% lift in imports. As ever with this data, particularly the export figure, we’ll have to wait until the Hong Kong trade data is released later in the month to verify its accuracy.

Canadian unemployment tumbled to the lowest level since November 2008 in October with a decline to 6.50% reported. The reading was well below the 6.8% rate of September and expectations for an increase to 6.9% and came despite the national participation rate holding steady at 66.0%. A large 43.1k increase in net employment, coming on the back of a 74.1k gain in September, was largely behind the surprise decline in unemployment with the figure coming in well ahead of expectations for a drop of 5k. Adding to the result, the number of full time workers increased by 26.5k, outpacing a 16.5k rise in part-time roles.

Germany’s trade surplus expanded strongly in September after narrowing in August with an increase to €21.9b reported. The reading was above the downwardly-revised €14.0b surplus of August and expectations for an increase to €19b and was the second-highest surplus in the history of the survey. Perhaps even more impressive than the headline rate was the composition with exports and imports rebounding by 5.5% and 5.4% respectively, well above the 2.7% and 1.1% gains expected. While nowhere near as impressive as the performance seen there, the French trade deficit also narrowed to €4.715b from €5.025b in August, the narrowest differential seen since April this year. Like Germany both exports and imports rose with gains of 1.7% and 0.7% respectively.

German industrial production rebounded in September after contracting at a slower-than-first thought pace in August with a gain of 1.4% reported. While an improvement on the 3.1% decline of August, something that was initially reported as -4.0%, the reading was below expectations for a gain of 2.0%. Elsewhere French industrial output held steady in September, a result that was higher than the downwardly-revised 0.2% contraction of August and forecasts for a similar drop of 0.2%, while Spanish industrial output rose 1.0% in the year to September, again above the 0.3% pace of August and expectations for an increase of 0.7%.

French business sentiment held steady in October with the Bank of France survey holding at 96. While it didn’t deteriorate any further, the reading remains at the equal-lowest level seen since July last year.

Britain’s trade deficit widened sharply to £2.838b in September. The reading was higher than both the £1.768b deficit of August and expectations for an increase to £2.3b with the goods trade deficit, that which excludes services, ballooning to £9.821b from £8.95b in August.


The Day Ahead (AEDT)

The ASX 200 looks set to start the new week marginally in the red with SPI futures pointing to a decline of 3pts on the open. While Westpac will be trading ex-dividend, something that will likely weigh on the financials sector, given strength in the Australian Dollar and a rebound in commodity prices on Friday, a modest gain, fuelled by low volumes, looks the most plausible outcome today.

The AUDUSD has continued its post non-farm payrolls bounce this morning, largely as a result of USD weakness across the board, with the pair currently fetching .8657. With no major market-moving events scheduled either domestically or abroad, coupled with thin market conditions before Veteran’s Day in the US tomorrow, a quiet session of trade is expected. On the downside support is found at .8652, .8637 and at .8625 with resistance kicking in at .8666, .8680 and again at .8700.

Australian home loans data for September will be released at 11.30am this morning. A fall of 0.4% is tipped following a 0.9% decline in August. Given the focus on investor housing finance by the RBA that component will likely be influential. Elsewhere in the region we’ll also receive CPI and PPI data from China at 12.30pm.

A quiet data calendar to start the week with Canadian housing starts, Italian industrial production and the Sentix investor survey from the Eurozone the only releases of note. On the policy front Mark Carney, Bank of England Governor, speaks at 5.45pm from Basel.


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