Friday’s U.S. unemployment report was far less robust than anticipated. This consensus miss led to a selloff in the DOLLAR and a rally in commodities as the weak number gave rise to the need for more aggressive FED action. At first blush the GOLD was sold and other commodities also were falling but that didn’t last long as the risk-on trade gained the upper hand on the full execution of QE2. The worst part of the unemployment data was that the RATE INCREASED TO 9.8 PERCENT and this is what drives the FED at this juncture.
Weekend news stories were leading with the unemployment number for that is presently packed with the most political dynamite. The rate is going to be problematic politically for as I wrote on Thursday, it is going to be sticky to the high side as more workers re-enter the job force and begin looking for jobs as the economy improves. The data was overall weak as the average hourly earnings (AHE) was flat as was the average work week. Late in the day the equity market got a rally as pundits surmised that the weak jobs number will insure that the BUSH tax cuts will be maintained.
Leaked headlines from BERNANKE‘s interview on 60 Minutes Sunday also aided the EQUITY rally. The interview was taped prior to the unemployment report but it was reported that Bernanke said that QE2 would be enhanced if needed. The idea of more FED liquiidty also led the the EURO and GOLD to weekly highs just before the electronic close. As a trader and analyst, I wonder if the regulators are going to deem the release of the 60 minutes headlines, INSIDER TRADING for somebody certainly has advance notice of the interview that will air Sunday night.
A note to Chairman Bernanke: Any time you might have market-moving interviews you should do them live and not taped for too many people vette the information before the general market has been given a chance to have an opportunity to analyze the news. Again, I am left to wonder whether or not this can be construed insider knowledge by the new, vigilant SEC?
The Canadian unemployment number was fairly tepid as only 15,000 jobs were created and many of those were part-time. What was disconcerting was that the headline rate dropped to 7.6 percent from 7.9 percent, which would have been more than robust. Upon analysis it seems the drop was caused by the large amount of Canadian teenagers that dropped from the labor pool but this is definitely something to watch for in the next release. Overall, Canada was slower than consensus but not too bad. The Canadian dollar was weak though as it suffered from being too closely tied to the U.S.
While on the commodity currency watch, Monday night at 9:30 CST the Australian central bank (RBA) releases its statement on interest rates and it appears that the consesnsus is for no change. I will not differ this time as the AUSSIE DOLLAR is strong and the Chinese are apparently snugging rates a bit so the RBA may want to wait to see if China begins to “slow.” Again, read the statement for a view on the Global Growth story as the Aussies are at the epicenter and China searches the world for natural resources. Chinese demand has been a major boost for Australia and it is always important to pay attention to Governor Stevens’ thoughts on growth.
Also in the emerging market world, Brazil raised its reserve requirements on time deposits by at least 4 percent as the CENRAL BANK attempts to slow the economy. The bank did not want to raise rates as it is looking to stem the inflow of hot money, so tightened by lifting reserves. The Brazilian real rallied in response but it is another area that needs watching as the the new government takes office in a few weeks. The new Brazilian president, DILMA ROUSSEFF, is openly opposed to further REAL strength as it renders Brazilian industrial and ag exports more costly in international markets. Now it is time to see what Ben Bernanke has to say.