Uncle Sam Wants You, Back At Work

US Non-Farm Payrolls sparkle

Uncle Sam wants you back at work, it seems, with US Non-Farm Payrolls adding 4.8 million jobs overnight, yet again blowing the forecasts out of the water.

Initial Jobless Claims for the week held steady at 1.4 million, and Continuing Claims for the week stayed stubbornly at around 19 million. The Non-Farms report highlighted a bounce-back in hiring in the worst affected sectors from Covid-19, such as retail.

Although the data gave cause for cheer and relief, the financial market’s reactions across asset classes were somewhat underwhelming. Stock markets closed higher, but not markedly so. The US dollar hardly moved versus the majors. US Treasury yields rose initially but soon retreated. Oil rose modestly, and gold rallied after the data.

To some extent, the good news had been expected and had been partially priced in ahead of the data. The data itself, though, was collated before the massive increase in Covid-19 cases across the US Sunbelt States. That has undoubtedly tempered the exuberance in a shortened session overnight.

Although the US holiday today will thin trading volumes around the world, the day is not without intrigue. Australia and China have both posted impressive data this morning, confirming that the recovery in these two key economies remains on track. China’s Caixin Services PMI easily exceeded forecasts, climbing to 58.4.

Australia, meanwhile, posted a record climb in May Retail Sales of 16.90%, albeit of a low COVID-19 base. Both data points, though, emphasise that life is returning rapidly to their respective domestic economies. That should ensure that equities in Asia, continue their rally from yesterday and end the week on a positive note.

Singapore will post Retail Sales for May at 13:30. Another tepid number is expected after April’s 31.70% monthly fall. Offsetting that is the fact that Singapore was in the midst of its circuit breaker lockdown at that stage. The data will be too far backwards looking to impact Singapore markets, with the Island State’s domestic demand already recessionary, even before the pandemic struck.

Hong Kong Bill creating tension

Geopolitics remains a sticking point in the v-shaped recovery hopes of financial markets. Press reported that Hong Kong arrested 400 people under their freshly minted security law yesterday. The US Congress sent a bill to the President for signing, sanctioning Chinese officials associated with repression in Hong Kong and other parts of China.

Australia and Great Britain stuck to their guns over the legality of the new Hong Kong law and made noises about accepting millions of new citizens from the SAR. China did what it always does in this situation, got upset and threatened all the above with reprisals.

Doubts over whether China’s signature on a document is worth the paper it was printed on aside; I suspect that the intractable differences all both sides are weighing on markets. Ahead of the weekend and a US holiday, that is tempering the v-shaped recovery optimism.

From an Australian perspective, PM Morrison’s offer yesterday to provide a haven to Hong Kong citizens continues to confuse. Selling this to the electorate would be like selling ice blocks to Eskimos. Nor does the Australian PM have a distinguished record regarding immigrants, even from developing countries like New Zealand. Hong Kongers would be well advised to read the small print carefully. Christmas Island is nowhere near Sydney.

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Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was OANDA’s Senior Market Analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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