St George Economics economy and finance update

Share Markets:

A smaller than expected gain in US payrolls set the tone for financial markets on Friday night, ahead of the start of the corporate earnings season this week. The Dow fell 0.5%, the S&P 500 lost 0.7% and the Nasdaq fell 0.9%.

Bonds:

Concerns about the outlook for US economic growth, following the release of the payrolls data, boosted US government bonds at the long end (yields fell).

Foreign Exchange: 

The Aussie dollar fell against the major currencies, amid concerns about the outlook for global economic growth.

The Yen defied this trend, falling versus the Aussie and the other major currencies, as investors continued to sell the Yen following the Bank of Japan's announcement of significant monetary stimulus last week.

The Aussie dollar hit a new four-and-a-half year peak against the Yen.

Commodities:

Commodity prices weakened, with copper and oil prices softening after the US payrolls data raised concerns about the outlook for global economic growth.

Australia:

There was no significant data released locally on Friday.

Europe: 

Euro zone retail sales fell 0.3% in February, reversing part of the 0.9% gain in January, and still down 1.4% for the year to February. German factory orders jumped 2.3% in February, more than reversing their 1.6% January decline, with similar gains in both domestic and foreign demand.

United Kingdom:

House prices rose 0.2% in March, according to Halifax, for a 1.1% increase in the year to March.

United States:

US non-farm payrolls rose just 88k in March. Even with 61k in upward revisions to the previous two months, this was a much softer than expected result.

Industries reporting job losses for the month included factories, retail, finance and government. Hours worked rose 0.3% in March, while hourly earnings were unchanged in March after rising a revised 0.1% in January-February data.

The unemployment rate, which is taken from the separate household survey, edged down to a four-year low of 7.6% in March, from 7.7% in February.

This was due to a decline in workforce participation rate to 63.3% in March, from 63.6% at the beginning of the year (potentially reflecting discouraged workers who have stopped looking for jobs.)

The US trade deficit narrowed from US$44.5bn to US$43.0bn in February, with exports rising 0.8%, but imports unchanged for the month.

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