Australian Employment Data Much Stronger Than Expected

While the Dow Jones closed 0.2% higher the S&P500 fell by 0.1% as the US headline CPI data came out higher than expected. Excluding food and energy, however, the core CPI was up 0.2%, as expected. Later in the day, Treasury Secretary Steve Mnuchin stated that the government is more concerned about the lack of economic growth than inflation. This sparked a rally in gold as it shifts market expectations towards a more dovish stance regarding future rate hikes.

Yesterday’s Australian employment data showed much stronger job gains than expected. Approximately 40,000 new full-time jobs were created and 14,000 part-time jobs. Although the unemployment rate remained steady this was partly due to more people entering the workforce i.e. the participation rate increased.  

Gold got another boost overnight as it appears North Korea has launched another missile over Japan. This is the second such missile in three weeks and will certainly elicit condemnation from the US, South Korea and Japan.

The Bank of England decided to keep rates on hold at 0.25%, as expected, although the statement suggested that monetary stimulus may be wound back in coming months. This stimulus has been coming in the form of government and corporate bond purchases designed to pump more money into the system. Two of the voting members voted to raise rates while seven voted to remain on hold. The FTSE 100 fell by 1.1% on the session.

Later tonight US retail sales data will be released. Although the prior month’s data was strong, it has been a relatively weak year for retail sales in the US.  

  

Data Release:

–    US Retail Sales 10:30pm AEST

–    US Empire State Manufacturing Index 10:30pm AEST

–    US Industrial Production 11:15pm AEST

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This article was written by William O’Loughlin – Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via william.oloughlin@rivkin.com.au or by phoning +612 8302 3633.