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The Weekly Wrap – U.S Labor Market Data Gyrates the Global Financial Markets

The Stats

It was a particularly busy week on the economic calendar, in the week ending 4th June.

A total of 80 stats were monitored, following 41 stats from the week prior.

Of the 80 stats, 48 came in ahead forecasts, with 27 economic indicators coming up short of forecasts. There were 5 stats that were in line with forecasts in the week.

Looking at the numbers, 49 of the stats reflected an upward trend from previous figures. Of the remaining 31 stats, 26 reflected a deterioration from previous.

For the Greenback, economic data from the U.S and FOMC chatter continued to be the main area of focus. In the week ending 4th June, the Dollar Spot Index rose by 0.12% to 90.136. In the previous week, the Dollar had risen by 0.02% to 90.031.

Out of the U.S

It was a quiet start to the week, with the U.S markets closed in recognition of Memorial Day on Monday.

On Tuesday, the ISM Manufacturing PMI rose from 60.7 to 61.2, supporting the market optimism towards the economic outlook.

The markets then needed to wait until Thursday and Friday for the key stats of the week.

ADP nonfarm employment change and weekly jobless claims were in focus along with the market’s favored ISM Non-Manufacturing PMI figures for May.

In May, nonfarm payrolls surged by 978k according to the ADP, coming in well ahead of a forecasted 650k increase. In April, nonfarm payrolls had risen by 654k.

Initial jobless claim figures also impressed. In the week ending 28th May, initial jobless claims fell from 405k to 385k. Economists had forecast a decline to 390k.

Service sector PMI numbers were also positive, with the ISM Non-Manufacturing PMI climbing from 62.7 to 64.0. Economists had forecast an increase to 63.0.

At the end of the week, it was another story, however.

Nonfarm payrolls increased by just 559k in May, falling well short of the ADP’s figures. Economists had forecast a 650k increase following April’s modest 278k rise.

A fall in the participation rate and increase in payrolls supported a fall in the unemployment rate.

In May, the U.S unemployment rate fell from 6.1% to 5.8%. This was not enough, however, to soften the impact from the disappointing NFP numbers…

In the equity markets, the NASDAQ rose by 0.48%, with the Dow and the S&P500 seeing gains of 0.66% and 0.61% respectively.

Out of the UK

It was a relatively quiet week, with finalized private sector PMIs for May in focus.

The stats were mixed in the week. In May, the manufacturing PMI rose from 60.9 to 65.6. While up from April, this was down from a prelim 66.1.

On Thursday, service sector PMI numbers provided Pound support.

In May, the services PMI rose from 61.0 to 62.9, which was up from a prelim 61.8.

Construction PMI figures from Friday were also out but had a muted impact on the Pound.

While the stats were Pound positive, concerns over new COVID-19 strains identified in the UK weighed on the Pound.

In the week, the Pound fell by 0.22% to end the week at $1.4157. In the week prior, the Pound had risen by 0.27% to $1.4188.

The FTSE100 ended the week up by 0.66%, following a 0.06% rise from the previous week.

Out of the Eurozone

Private sector PMIs, and German and Eurozone unemployment and retail sales figures were in focus.

Early in the week, manufacturing sector PMI numbers for May impressed. The Eurozone’s PMI hit a new record high. The Netherlands, Italy, Ireland, and Austria also logged record highs in the month.

Unemployment figures were also positive. In April, the Eurozone’s unemployment rate fell from 8.1% to 8.0%. In Germany, unemployment fell by a larger than expected 15k to leave the unemployment rate unchanged at 6.0% in May.

Mid-week, retail sales figures from Germany did disappoint, however, with sales down 5.5% in April. In March, retail sales had risen by 7.7%.

In the 2nd half of the week, service sector activity and retail sales figures for the Eurozone were in focus.

For May, the Eurozone’s Composite PMI came in at 57.1. This was up from an April 53.8 and a prelim 56.9.

At the end of the week, Eurozone retail sales figures had a muted impact on the EUR following weak numbers from France and Germany.

For the week, the EUR fell by 0.21% to $1.2167. In the week prior, the EUR had risen by 0.08% to $1.2192.

The DAX30 rose by 1.11%, with CAC40 and the EuroStoxx600 ending the week up by 0.49% and by 0.78% respectively.

For the Loonie

It was a busy week. Early in the week GDP numbers for the 1st quarter were in focus.

Month-on-month, the economy expanded by 1.1% in March, coming in ahead of a forecasted 1.0%. In February, the economy had expanded by a more modest 0.4%.

Quarter-on-quarter, the economy expanded by a further 1.4%, following 2.2% growth in the 4th quarter of last year.

At the end of the week, Ivey PMI and employment figures were in focus.

In May, the unemployment rate ticked up from 8.1% to 8.2%, driven by a 68k fall in employment. In April, employment had tumbled by 207.1k.

Mid-way through the 2nd quarter, the Ivey PMI provided some support, however. In May, the Ivey PMI climbed from 60.6 to 64.7.

Other stats included current account, RMPI, and building permit numbers that had a muted impact on the Loonie.

In the week ending 4th June, the Loonie slipped by 0.07% to C$1.2084. In the week prior, the Loonie had fallen by 0.08% to C$1.2076.

Elsewhere

It was a mixed week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 4th June, the Aussie Dollar rose by 0.35% to $0.7739, while the Kiwi Dollar fell by 0.50% to $0.7214.

For the Aussie Dollar

It was a busy week.

Company gross operating profits, 1st quarter GDP and trade figures were key stats in the week.

Gross operating profits fell by a further 0.3% in the 1st quarter, following a 4.8% slide from the 4th quarter.

On the positive, however, were better than expected GDP and trade figures.

In the 1st quarter, the Australian economy expanded by 1.8%, coming in ahead of a forecasted 1.1%. In the 4th quarter, the economy had expanded by 3.1%. Year-on-year, the economy grew by 1.1%. In the 4th quarter, the economy had contracted by 1.0%.

In April, the trade surplus widened from A$5.574bn to A$8.028bn, also positive for the Aussie Dollar.

Finalized retail sales figures were also out and were in line with prelim figures, affirming a 1.1% rise in April.

While the stats were skewed to the positive, the RBA weighed on the Aussie Dollar on Tuesday.

Standing pat on monetary policy, the RBA stood by its policy outlook, forecasting a hold on policy until 2024 at the earliest.

For the Kiwi Dollar

It was a quiet week.

Business confidence and building consents were in focus.

In May, business confidence improved, with the ANZ Business Confidence Index rising from -2 to 1.8. This was down 5 points from a prelim 7.0, however.

Building consents continued to rise in April, with consents up 4.8% following a 19.2% surge in March.

For the Japanese Yen

It was a busier week.

Industrial production, retail sales, capital spending, and household spending figures were in focus.

Finalized private sector PMIs for May also drew interest.

The stats were skewed to the positive in the week.

Retail sales and household spending delivered some comfort. In April, retail sales rose by 12%, with household spending up 0.1% in the month. Economists had forecast a 2.2% decline in household spending.

Industrial production rose by a further 2.5%, following a 1.7% increase in March, which was also positive.

Capital spending disappointed, however, falling by 7.8% in the 1st quarter. In the 4th quarter, spending had declined by a more modest 4.8%.

Private sector PMIs delivered mixed results in the month, with the services sector struggling.

In May, the services PMI fell from 49.5 to 46.5, which was up from a prelim 45.7. A rise in new COVID-19 cases weighed on service sector activity in May.

The manufacturing sector continued to see growth, however, with the PMI seeing a modest decline from 53.6 to 53.0. This was up from a prelim 52.5.

The Japanese Yen rose by 0.30% to ¥109.52 against the U.S Dollar. In the week prior, the Yen had fallen by 0.82% to ¥109.85.

Out of China

Private sector PMIs for May were out.

It was a mixed set of numbers, however.

The NBS Manufacturing PMI slipped from 51.1 to 51.0, while the non-manufacturing PMI increased from 54.9 to 55.2.

It was a different story for the market’s preferred Caixin numbers, however. The Manufacturing PMI increased from 51.9 to 52.0, while the services PMI fell from 56.3 to 55.1.

In the week ending 4th June, the Chinese Yuan fell by 0.42% to CNY6.3953. In the week prior, the Yuan had risen by 1.02% to CNY6.3685.

The CSI300 and the Hang Seng ended the week down by 0.73% and by 0.71% respectively.