Markets keen for more risk as data shows promise
THE eagerly anticipated payrolls data on Friday night was good enough to keep alive expectations of a September rate hike from the Fed and this weighed on risk appetites.
The Dow fell 1.7%, the S&P 500 was down 1.5% and the Nasdaq lost 1.10% for the session.
The US stockmarket will be closed for Labor Day today, while China's stockmarket will reopen after closing on Thursday and Friday for the military anniversary celebrations.
While the payrolls data pushed yields higher on expectations of a rate hike from the Fed, nervousness about financial market volatility weighed on yields.
US bond yields rose following the release of the payrolls data, however, later gave back some of those gains to finish mixed.
Yields on US 2-year notes finished slightly higher, while the yields on 10-year notes ended lower.
In a speech titled "The Case Against Further Delay" Richmond Fed President Lacker (a hawk) said "it's time to align our monetary policy with the significant progress we have made."
He noted reports of difficulty hiring qualified workers have become more "widespread and persistent" in his region.
The US dollar index jumped following the payrolls data, but retreated later in the session to close modestly lower on the day, but still near a two-week high.
The Euro drifted higher against the US dollar, with EUR/USD currently trading at 1.1149. The Yen gained ground versus the US dollar.
USD/JPY made a two-week low of 118.61 post payrolls.
Sterling, however, lost ground against the US dollar as softer economic data from earlier in the week led investors to question the timing of a rate hike from the Bank of England.
GBP/USD fell to a three-month low of 1.5165, but is trading a little higher at 1.5184 at the time of writing.
The Aussie dollar underperformed, falling to a new six-and-a-half year low of 0.6896 early this morning.
Increased risk aversion, ongoing concerns about China and weaker commodity prices weighed on the local currency.
Commodity prices fell on diminished risk appetites. Copper declined sharply after weak German factory orders raised concerns about global demand.
There was no significant data on Friday.
German factory orders were weaker than expected, falling 1.4% in July. For the year to July, factory orders are down 0.6%, deteriorating from 7.0% growth in the year to June.
Payrolls rose by a smaller than expected 173k in August (missing consensus expectations for a 217k increase). It was the smallest increase since March.
Payrolls for July were revised up to an increase of 245k, however, from the previously reported 215k and June's payrolls were also revised higher.
The unemployment rate fell to 5.1% in August, from 5.3% in July. This was the lowest since April 2008 and is now at a level which the Fed considers as full employment.
Hourly earnings were stronger, rising 0.3%, with the annual rate at 2.2% for the year to August.