THE KING IS BACK BABY
After the Fed announced that they would do "everything and nothing" yesterday, USD has rallied, and risk assets have fallen.
U.S. Futures continued their decline overnight
... and European futures are set to open on the back foot too.
On hold, as expected.
As has been the central bank trend of late, forecasts were cautiously revised higher with a healthy does of caveats.
- Economy is in a severe state but appears to be picking up
- Outlook for exports and output is picking up
- Capex falling, Corporate profits and business sentiment worsening
- Consumption gradually picking up but...
- CPI is likely to hover in negative territory for the time being
At the two-day rate review that ended on Thursday, the BOJ maintained its -0.1% short-term interest rate target and a pledge to guide 10-year government bond yields around zero. The decision was made by a 8-1 vote.
Australian Employment Data
"Stunning August Jobs Data" is how CommSec described it.
There is no doubt that this is a stunning set of job figures – especially considering that nation’s second largest economy was in lockdown throughout the month.
More people were looking for jobs in August, more people found jobs, and more employees reconnected to their workplaces.
The jobless rate fell sharply and a six-digit gain in jobs was recorded.
More than 86,000 unemployed people found work.
The cherry on top was a drop in the youth jobless rate from 16.3 per cent to 14.3 percent.
Lots of reasons to be cheerful.
Employment rose by 111,000 in August (survey forecast: -35,000) after rising by an upwardly-revised 119,200 jobs in July (previously reported as an 114,700 increase in jobs).
Full-time jobs rose by 36,200 and part-time jobs rose by 74,800.
The unemployment rate fell from a 22-year high of 7.5 per cent to 6.8 per cent in August (survey forecast: 7.7 per cent).
It was the biggest monthly fall in the jobless rate in 32 years (July 1988).
Hours worked rose from 1.682 million hours to 1.683 million hours (up 0.1 per cent) but were down 5.1 per cent over the year.
Participation rate: The participation rate rose from 64.7 per cent to 64.8 per cent in August.
Spare capacity: In August, the underutilisation rate fell from 18.7 per cent to 18.0 per cent. The underemployment rate was broadly steady at 11.2 per cent.
Whilst employment increased, it was mainly driven by an increase in self employed workers, and hours worked did not increase proportionately.
As Westpac noted,
Even with the surge in total employment, +111.0k/0.9%, hours worked lifted just 0.1% due to a –4.8% decrease in hours worked in Victoria (employment fell -1.3%) with all other states and territories recording a combined increase of 1.8% in hours worked.
Even more so than in April, the shutdown in Victoria had a larger impact on hours worked than it had on employment.
A good read from ZH on the potential rotation from tech to value if another stimulus deal is passed;
The problem, as the market made it very clear, is that whereas continued deadlock in Congress - with Trump backing Republicans - would mean more monetary stimulus, another $1.5 or $2 trillion in fiscal stimulus actually stands a good chance of generating a sharp (albeit fleeting) reflationary episode.
And since the Fed will be there to monetize all the newly issued debt to pay for all this stimulus it's win-win (for everyone but the US debt which is now exploding at a record pace that has surpassed World War II).
In fact, as Bank of America's Michael Hartnett said last week, a $1.5-$2 trillion fiscal stimulus deal, coupled with an October vaccine represents the "most dangerous combo for Treasury and equity bulls" and represents "a messy inflection handoff to higher rates, inflation & inflation assets."
In the process, such deflationary assets as tech stocks and Treasurys would get clobbered, something we are already seeing this evening as the Nasdaq slides amid fears that fiscal stimulus-driven inflation may indeed be coming.
"Green infrastructure" boom down under...?
On the calendar, the final EZ CPI readings should serve to confirm the preliminary estimates.
BOE decision and U.S employment claims the highlights.