- US Job Openings and Labor Turnover Survey (JOLTS), a measure of labor demand, went up by 590,000 to 10.1mn at the end of June, the Labor Department said in its monthly report released yesterday. Hiring rose to 6.7mn June from 6.0mn in the prior month, the second largest increase since the government started tracking the series in 2000, setting a record high for the survey. The data reflects that the supply constraints that have held back the labor market remain elevated even as the pace of the economic recovery gathers speed. Vacancies increased in all four regions and the job openings rate rose to 6.5% from 6.1%. Labour shortages have been reported, particularly in leisure and hospitality. The biggest increases in vacancies in June were in professional and business services, retail trade and accommodation and food services. The rise in hiring in June was led by retail trade, with 291,000 more positions filled, while state and local government education filled 94,000 jobs. The report showed the number of people voluntarily leaving their employment in June increased to 3.9mn from 3.6mn in May, well above pre-pandemic levels The quits rate, usually seen as a barometer of job market confidence, was up in all but five of the 21 private industry sectors. Generous unemployment benefits, childcare issues and worries about over the virus have been cited as factors holding back people returning to the workforce.
- The New York Federal Reserve released a report showing US consumers' inflation expectations for the near future remained elevated last month while the outlook for their financial prospects over the next year dimmed. Median expectations for inflation over the next year stayed at a series high of 4.8% y/y in July, while expectations for what inflation will be over the next three years increased slightly to a median of 3.7% y/y from 3.6% y/y in June, the highest level since August 2013. Consumers' expectations for how much home prices will rise over the next year dropped to a median 6.0% y/y in July from 6.2% y/y in June. While the mean perceived probability of becoming unemployed over the next year rose to 12.2%, the second lowest reading for the survey launched in 2013.
- Saudi Arabia’s economy grew 1.5% y/y in Q2 2021 according to preliminary estimates, with non-oil sector growth rebounding 10.1% y/y from Q2 2020. The oil sector contracted -7.0% y/y however as supply remained constrained in line with the OPEC+ agreement. Non-oil growth in Saudi Arabia has recovered faster than we anticipated, despite the VAT and customs duties increases last summer. With oil production increases in H2 2021 now agreed as well, we expect full year GDP growth will be in the 2-2.5% range. We will publish a revised forecast once the detailed Q2 GDP data is made available.
Today’s Economic Data and Events
13:00 EU German ZEW Economic Sentiment (Aug) Forecast 57
Fixed Income
- There were few fundamental data points to shift the Treasury market at the start of the week but yields extended their gains from the end of last week. Yields on 2yr USTs added another 1bp to settle at 0.2203% while 10yr UST yields edged up almost 3bps to close at 1.3237%, their highest close since mid-July.
- Raphael Bostic, president of the Atlanta Fed, said overnight the US economy was on “the road to substantial progress” after the strong July NFP report. Bostic didn’t outline a timeline for when he believed tapering of asset purchases should occur but did say he favoured it happening “relatively fast.” Elsewhere, Thomas Barkin from the Richmond Fed proposed that the Fed could start to taper by October to December provided data remains good.
- Turkey was the standout among emerging markets as yields jumped 24bps to over 17% following comments from president Recep Tayyip Erdogan calling for a rate cut ahead of this week’s TCMB meeting.
FX
- The dollar remained supported at the start of the trading week, boosted by more hawkish commentary from Fed officials. The DXY index added 0.16% to settle at 92.945, gaining mainly in the latter half of the day.
- The dollar was stronger across the board. EURUSD sank 0.2% to 1.1737 as positive data in the US draws flows toward USD assets and the yield differential moves in favour of the dollar. USDJPY closed little changed albeit with an upward bias while GBPUSD came off by around 0.2% to 1.3847.
- Commodity currencies were weaker on the whole. USDCAD rose 0.18% to 1.2577 while AUD and NZD fell either side of 0.3%.
Equities
- Equity markets were fairly subdued to start the week in the absence of any new major data releases. There were modest slips from the record highs set last week by the S&P 500 and the Dow Jones, which lost -0.1% and -0.3% respectively. The NASDAQ added 0.2%, but remained just shy of the record high it hit last Thursday.
- In Europe, Italy’s FTSE MIB was the outlier with a 0.5% gain, but moves elsewhere were sedate. The composite STOXX 600 added 0.2% to a new record, with the CAC and the DAX both losing -01%, while the FTSE 100 added 0.1%.
- In Asia, the Shanghai Composite continued to rebound following its recent sell-off with a 1.1% gain yesterday.
Commodities
- Oil prices continued to crumble to start the trading week as fears over rising caseloads of Covid-19 weigh on the demand outlook. Brent futures fell more than 2.3% to settle at USD 69.04/b while WTI was off by 2.6% to USD 66.48/b. Markets may continue to be browbeaten as the flow of news from Asia remains negative.
- Metals prices were enormously volatile at the start of the trading week with spot gold plunging to as low as USD 1,690/troy oz as the rise in UST yields likely triggered stops and forced selling. Prices managed to recover but still ended the day at USD 1,730/troy oz, down by 1.9%, its third day in a row of losses. Silver mirrored the moves in gold, with a rapid sell off early in the day before pulling back later in the session. Silver prices fell a fourth day in a row, settling at USD 23.45/troy oz, down more than 3.6%.
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