Equities and bonds sold off in the wake of the May US payrolls report. The US 10-year yield rose more than ten basis points for a fresh YTD high of 2.41% and the DJIA slid 45 points before things turned around. As of writing, the DJIA is still down 0.18%, but the S&P500 is up 0.07% and the Nasdaq up 0.04%.
The May jobs report was the strongest yet in 2015: non-farm payrolls gained 280K from a revised 221K total in April, the number of discouraged workers fell to the lowest level since 2008, the participation rate climbed slightly and while the unemployment rate rose to 5.5% from 5.4%, the bump higher was completely due to more people re-entering the workforce. Wage growth was seen in the average hourly earnings component, with the three-month annualized wage growth rate at +2.9% after today's data. Before the number, markets were putting the probability of a September Fed hike around 50% and a December tightening close to 100%. Analysts suggest today's data should meaningfully increase the chance of a September rate hike.
Financial firms are moving higher this morning in the wake of the jobs report and the adjustments in rate hike expectations. Major bank stocks are up nearly 2% a piece, while asset managers are also gaining. Conversely, homebuilders and REITs are losing ground on the prospect of more expensive financing for real estate.
OPEC left its production ceiling unchanged at 30M bbl per day, as expected. OPEC Secretary General El-Badri said that all OPEC ministers agreed to stick with current ceiling, commenting that OPEC can longer tolerate oil prices at or above $100/bbl. Analysts note that OPEC has been producing more than quota for the last 12 months. The Iranians meanwhile promised to hike output the day sanctions are lifted. WTI is testing yesterday's lows just below $57, after trading above $61 earlier in the session. Brent is just above $61, at two-month lows.
Among the biggest gainers this morning is JA Solar, up 15% on the session after receiving a going-private offer valued at $9.69/ADS. On the downside, Zumiez is down 11% after missing on earnings and receiving multiple analyst downgrades.
***Looking Ahead***
- 12:30 (US) Fed's Dudley to speak
- 13:00 (US) Baker Hughes Rig Count
- 14:00 (CO) Colombia Central Bank Monetary Policy Minutes
- 15:00 (US) Apr Consumer Credit: $16.0Be v $20.5B prior
- 20:00 (CO) Colombia May CPI M/M: No est v 0.5% prior; Y/Y: No est v 4.6% prior
- 20:00 (CO) Colombia May CPI Core M/M: No est v 0.3% prior; Y/Y: No est v 3.4% prior
***Economic Data***
- (CL) Chile Apr Economic Activity Index (Monthly GDP) M/M: 0.0% v -0.3% prior; Y/Y: 1.7% v 1.6% prior
- (PL) Poland May Official Reserves: $103B v $102.9B prior
- (RU) Russia May Official Reserve Assets: $356.8B v $356.0B prior
- (CL) Chile Apr Nominal Wage M/M: -0.2% v 0.8% prior; Y/Y: 6.4% v 7.1% prior
- (US) May Change in Nonfarm Payrolls: 280K v 226Ke; Change in Private Payrolls: 262K v 220Ke
- (US) May Unemployment Rate: 5.5% v 5.4%e v 5.4% prior
- (US) May Average Hourly Earnings M/M: 0.3% v 0.2%e; Y/Y: 2.3% v 2.2%e; Average Weekly Hours: 34.5 v 34.5e
- (CA) Canada May Net Change in Employment: 58.9K v 10Ke; Unemployment Rate: 6.8% v 6.8%e
- (CA) Canada Q1 Labor Productivity Q/Q: -0.1% v -0.2%e
- (MX) Mexico May Consumer Confidence Index: 92 v 91.3 prior
[I]Contributed by Trade The News[/I]
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