US jobless claims data allay markets fears

US initial jobless claims came in lower than expected for the week ending August 3, declining to 233k from 250k the previous week. Continuing claims were in line with the median forecast and slightly higher than the prior week at 1875k. While initial jobless claims have trended higher since the start of the year, consistent with a softening labour market, they are still down on a y/y basis.

The Reserve Bank of India kept its repo rate on hold at 6.5% as expected yesterday. Four MPC members voted for a hold while two voted for a cut. The MPC’s tone remained hawkish, citing “persistent food inflation” and its potential second round effects as the main reason for the central bank to keep rates unchanged for the time being. CPI inflation increased to 5.08% y/y in June.

Key Economic Data and events

10:00 Germany CPI (Jul) forecast 2.6% y/y (EU harmonized)

Fixed Income

• A disappointing 30y treasury bond auction along with weaker than expected jobless claims data saw treasury yields rise on Thursday. The 2y yield rose +8bp to 4.04% yesterday while the 10y yield rose +5bp to 3.99%.
• Richmond Fed President Tom Barkin said the central bank had time to assess whether the economy was normalizing or whether the Fed needed to do more to support the economy.

FX

• The US dollar spot index was largely unchanged on Thursday. JPY recovered some of its recent losses to end the day at 146.11/USD while CHF gained 0.6% to 0.8579. EUR was a touch firmer and GBP a touch weaker against the dollar. The commodity currencies all weakened against the greenback on Thursday with NZD down -0.5% to USD 0.5993.

Equities

• US equity markets rallied strongly yesterday after jobless claims data allayed some fears about weakness in the labour market. The Nasdaq100 rose 3.1% and the S&P500 gained 2.3%. The DJIA was up 1.8% as well. European stocks were little changed yesterday with the DAX index up 0.4% and the CAC40 down -0.3%.
• Local equity markets were led by ADXGI which gained 0.8%. DFMGI was flat while TASI fell -0.5% on Thursday.

Commodities

• Oil prices rose for the third consecutive day yesterday with Brent up 1.1% to USD 79.16/b and WTI up 1.3% to USD 76.19/USD. In the absence of significant economic data, the focus remains on geopolitics in the Middle East, where the US has called for Gaza ceasefire talks next week.