Markets Futures Fall on US Non-Farm Job Data, Wheat Soars

Market Update
Friday, August 6, 2010

US Stock Futures Fell Slightly After July Jobs Data Disappoint

U.S. stock futures fell Friday after the U.S. economy shed more jobs than expected in July and the unemployment rate did not budge from 9.5%, compounding worries the recovery's progress has stalled. Canada July Jobs Down 9,300, Jobless Rate 8.0%. The Canadian economy unexpectedly shed jobs in July, the first decline in employment since December 2009, as gains in part-time employment were offset by a sharp decline in the number of full-time jobs. The economy lost 9,300 net jobs in June and the unemployment rate rose to 8.0% from 7.9% the previous month, Statistics Canada said Friday.

The market had expected that Canada would have a net 12,500 jobs to be added in July and the jobless rate to remain steady. The declines follow strong employment growth in recent months, including a record 108,700 gain in April.

The highly-anticipated US jobs report sent Dow Jones Industrial Average futures down 55 points to 10580, Standard & Poor's 500-share futures down 7 points to 1116 and Nasdaq 100 futures down 11 points to 1891. Prior to the data, Dow Jones Industrial Average futures had been up 15 points, S&P 500 futures edged up 2 and Nasdaq futures rose 3. Changes in stock futures do not always accurately predict early stock moves after the open.

Non-farm payrolls fell by 131,000 last month as the rise in private-sector employment was not enough to make up for the government jobs lost, the U.S. Labor Department said Friday. Only 71,000 private-sector jobs were added last month while 143,000 temporary workers on the 2010 census were let go. Economists polled by Dow Jones Newswires were expecting total nonfarm payrolls to drop by a smaller 60,000 in July.

The jobless rate, which is calculated using a separate household survey, held steady at 9.5% in July. Economists were expecting it to edge higher to 9.6%.

Stocks had hummed around the flatline Thursday in anticipation of the key report, which is also expected to factor heavily into the Federal Reserve's decision whether to make a symbolic policy shift at its meeting next week. Fed officials will likely consider whether to use cash the Fed receives when its mortgage-bond holdings mature to buy new mortgage or Treasury bonds, instead of allowing its portfolio to shrink gradually, as it is expected to do in the months ahead.

In the currency markets, the dollar weakened against both the euro and the yen. The euro was trading recently around $1.3214, up from $1.3186 late Thursday in New York. The U.S. Dollar Index, which tracks the U.S. currency against a basket of six others, slipped 0.2%. Demand for safe-haven Treasurys increased, with the 10-year note rising to push its yield down to 2.88%.

Crude-oil prices slipped to $80,90 pbl, before returning to $81.34.

OPEC Secretary General Abdalla Salem El-Badri said world crude markets have plenty of oil available and that he wants to see crude prices remain around their current value.

"I hope that prices will remain close to their current range of around $80 a barrel for the foreseeable future," El-Badri said in an e-mail interview with MF-Dow Jones, an Italian-language newswire published as a joint venture between Dow Jones and Class Editori.

"Oil markets are very well supplied today. One only has to look at the overhang and floating storage, which total 258 million barrels, to see that there is plenty of oil in the market," El-Badri said.

The secretary general reiterated his call for OPEC's 11-quota bound members to boost their lagging compliance with production cuts that have been in place since late 2008.

Adherence with those cuts, totaling 4.2 million barrels a day, stands at just 49%, according to a Dow Jones Newswires survey of analysts and traders released this week.

"We therefore need all of our members to show more discipline in adhering to their production allocation," El-Badri said.

The secretary general also said he expected oil-price volatility to continue, but did not want to see prices escalate.

"While we do not want prices to rise too high so that they hamper the economic recovery in any way, I believe it is now widely accepted that oil producers need a price that supports much-needed energy investment," El-Badri said.

He said it's too early to say what OPEC, which pumps about 40% of the 87 million barrels consumed each day globally, might do at its next policy meeting on Oct. 14 in Vienna.

OPEC remains cautious on the economic outlook despite various signs of recovery, the secretary general said.

"We are very aware of the challenges that lie ahead of us," he said, adding that OPEC remains concerned about the economic impact of governments eventually ending fiscal stimulus packages.

Gold futures advanced.



Thursday Market Close:

Dow Jones 10,674.98 -5.45 (-0.05%)
S&P 500 1,125.81 -1.43 (-0.13%)
Nasdaq 2,293.06 -10.51 (-0.46%)

Crude Oil 81.87 - 0.17%
Natural Gas 4.59 - 0.11%
Gasoline 2.16 - 0.36%
Heating Oil 2.17 - 0.54%
Gold 1194.74 - 0.03%
Silver 18.36 + 0.11%
Copper 3.35 - 0.15%

World markets:

Shanghai 2,658.39 +37.64 (1.44%)
Nikkei 225 9,642.12 -11.80 (-0.12%)
Hang Seng Index 21,678.80 +127.08 (0.59%)
TSEC 7,963.30 +26.45 (0.33%)
FTSE 100 5,399.05 +33.27 (0.62%)
CAC 40 3,780.41 +16.22 (0.43%)
S&P TSX 11,774.77 -70.28 (-0.59%)
S&P/ASX 200 4,566.10 -0.40 (-0.01%)
BSE Sensex 18,143.99 -28.84 (-0.16%)



Stocks:

Wheat Futures edge up on World wheat data. U.S. stocks fell as investors got increasingly jittery ahead of the government's monthly payrolls report due Friday morning. Other data have been providing conflicting messages, and Thursday's data were no exception. Initial jobless claims unexpectedly rose, while retailers reported mixed July same-store sales.


Treasurys:

Treasurys Rise, US Says Net $2 Billion Of Treasurys Stripped In July. Investors sought safety in Treasurys, which rose. The increase in Treasurys pushed the yield on the 10-year note down to 2.91%.The Treasury market posted a broad price rally as weak jobless claims data fueled jitters ahead of a key payroll report, driving investors into safe assets. As of 3:45 p.m. EDT, the benchmark 10-year note was 14/32 higher to yield 2.905%, the 30-year bond was 18/32 higher to yield 4.055%. The two-year note was 2/32 higher to yield 0.534%. Bond yields move inversely to prices.


Forex:


The U.S. Dollar Index, reflecting the U.S. currency against a basket of six others, slipped 0.1%. Treasurys rose, pushing the yield on the 10-year note down to 2.91%. Gold futures edged up.After some intraday fluctuation brought on by weaker-than-expected U.S. weekly jobless data and comments by ECB President Jean-claude Trichet, the euro returned to where it had been a day ago as investors seemed unwilling to stake out bold positions ahead of Friday's nonfarm payrolls report. "It raises the temperature from already being quite high," said Vassili Serebriakov, foreign exchange strategist at Wells Fargo, of the disappointing weekly jobless figures.


Friday's Calendar:

8:30 a.m.
July U.S. unemployment rate Non-Farm Payrolls (expected -60K), Unemployment Rate (expected 9.6%), Average Hourly Earnings (previous 22.530, Net Change (previous -0.02), Manufacturing Payrolls (previous +9K)

10:30 a.m.
U.S. Treasury Chief Economist Krueger discusses employment numbers

3:00 p.m.
June Consumer Credit Monthly Net Change (expected -5.3B)