Morning Minutes

US Nonfarm Payrolls and Wage Inflation Exceed Expectations

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Please note that after today, the Morning Minutes are taking a summer break and will return on Tuesday August 31.

As is typical for a Friday in the summertime, world markets have been pretty quiet overnight and into this morning with investors sitting on their hands ahead of the North American employment reports.

Overseas, the DAX, FTSE and Hang Seng are all essentially flat today. Japan and Australia rose 0.3% overnight while Italy is up 0.8%. Commodities are also bouncing back today with WTI crude oil up 1.2% and copper up 1.0%.

US nonfarm payrolls for July have come even stronger than expected (943K vs street 870K) with the added bonus of June payrolls being revised upward (938K vs previous 850K). The unemployment rate also beat the street (5.4% vs street 5.7%). Wage inflation continues to build, however (4.0% vs street 3.8%).

The reaction in US index futures to this news, which may pave the way for the Fed to start talking about tapering stimulus at its Jackson Hole conference later this month, has been mixed. The US 10-year treasury note yield, which was trading below 1.20% earlier in the week, has climbed back up above 1.25% and has moved up toward 1.27% on the news. US index futures are mixed with Dow futures rising 0.2% and NASDAQ futures falling 0.4%.

Canadian job growth slowed more than expected in July (94K vs street 177K and previous 230K, while the unemployment rate improved but not as much as the street had hoped. (7.5% vs street 7.4% and previous 7.8%).

We’re pretty much at the end of earnings season for US large cap companies with the focus now clearly turning to small and mid-cap companies. Overnight results out of the US were somewhat disappointing with Beyond Meat reporting a worse than expected loss (-$0.31 vs street -$0.24). Video game producer Zynga is down 16.4% premarket despite beating the street on user growth and earnings as investors focused on softer than expected sales guidance for next quarter instead.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

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