Economic Data

  • US Unemployment data recap for Sept.

Unemployment rate rises to 9.8 % from 9.7 %, the highest in 26 years.

Non-Farm Payrolls -263 K from -201 K in August, revised from -216 K

Average hourly earnings +0.1 % from +0.4 % in August (revised from +0.3 %)

Average work week 33.0 hours from 33.1 in August.

  • US Factory Orders in August -0.8 % m/m from +1.4 % in July (revised from +1.3 %), market expectations +0.3 %.
  • US Durable Goods in August -2.6 % m/m from -2.4 % in July

Comments

  • Fed’s Rosengren says that US economy recovery remains fragile. The economic recovery could fall short of market expectations. The monetary and fiscal policy must continue to support economy until private spending fully resumes. He agreed with Ben Bernanke when he said in his testimony that growth in both the 3rd and 4th quarters would not be enough to make any headway in reducing unemployment.
  • Dominique Strauss-Kahn, Managing Director of the IMF, says membership of G20 must be shifted to include more African representation.
  • World Bank IMF and G7 meet in Istanbul this weekend. In their communiqué at the end of their meeting on Saturday they will not change their usual language on currencies a G7 source is reported to have said. It is expected to reiterate what was said at their last meeting in April after which their communiqué read “Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability. We continue to monitor exchange markets closely, and cooperate as appropriate”.
  • Lawrence Summers, National Economic Council Director, said that it will take time to work through the problems on jobs. The US is in a different place now than where it was 9 months ago. The administration cannot rest until the economy gains jobs at a sufficient rate that will bring employment back to satisfactory levels. Experience suggests that the creation of jobs follows growth in output by some months. We are likely to see growth in Q3 so it is likely that it will be several months before we see growth in jobs. He agreed with yesterdays remarks by Ben Bernanke that if the US doesn’t get the deficit under control it could put pressure on the dollar.
  • Both the Canadian Finance Minister, Jim Flaherty, and Bank of Japan Governor Masaaki Shirakawa said that currency flexibility is the fundamental challenge in resolving global imbalances. Currency discussions are appropriate for G20 and should he also expected to be discussed by G7 this weekend in Istanbul. G7 is an easier forum to discuss FX than G20. At the meeting this weekend in Istanbul the topic of the economic and financial conditions behind recent FX moves is likely to be discussed although little will be mentioned in their communiqué..
  • Shirakawa also notes that the BOJ Tankan also backs up the view of the Bank of Japan that the Japanese economy has turned and is starting to recover.

Currencies

After the release of the worse than expected US jobs data the dollar was sold off notably against the Yen which strengthened to 89.04 (against the dollar) 129.01 (against the Euro) and 140.76 (against Sterling). Euro fell from its opening level of 1.4535 to 1.4480 and sterling from 1.5855 to 1.5801. Buying at the fixing coupled with rumors that the Bank of Japan had been checking rates saw the dollar-yen soar to 89.90 and the Euro-yen to 131.20 and sterling-yen to 142.80. Euro-dollar on the back of the Euro-Yen move made a high of 1.4646. The BOJ rumor was subsequently denied by one of the major Japanese Banks but by then the damage had been done. After London had gone home for the week-end the dollar gave back some of its gains with dollar-yen settling into a 89.45 – 65 range for the rest of the afternoon. Euro and sterling also dropped off and traded in ranges of 1.45 70-85 and 1.59 10-30 for the remainder of the session, in what was a very quiet Friday afternoon.

The dollar Index closed at 77.20 down 0.2 on the day and Gold at 1002.00

Ranges

  • EUR / USD 1.4479 / 1.4646
  • USD / JPY 88.61 / 89.91
  • GBP / USD 1.5801 / 1.5954
  • USD / CHF 1.0309 / 1.0435
  • AUD / USD 0.8568 / 0.8705
  • NZD / USD 0.7075 / 0.7207
  • EUR / GBP 0.9144 / 0.9195
  • EUR / JPY 129.02 / 131.22
  • GBP / YEN 140.75 / 142.91
  • Gold 986.00 / 1007.00

Stock Markets

  • Nikkei closed at 9,731-87 lower by 246-77 points (-2.47 %)
  • Hang Seng closed at 29,375-49 lower by 579-76 (-2.77 %)
  • Kospi markets closed for a National Holiday
  • Shanghai Composite Index markets closed for a National Holiday.
  • FTSE 100 closed at 4,988-70 lower by 59-11 (-1.17 %)
  • CAC 40 closed at 6,649-90 lower by 70-87 (-1.56 %)
  • DAX 30 closed at 5,467-90 lower by 86-65 (-1.56 %)
  • DJIA closed at 9,487-67 lower by 21-61 points (-0.23 %)
  • S & P 500 closed at 1,025-21 lower by 4-64 points (-0.45 %)
  • Nasdaq Composite closed at 2,048-11 lower by 9-37 (-0.46 %)