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Wednesday, August 31, 2016
Lower markets on August employee data
Dow dropped 40, decliners over advancers 4-3 & NAZ fell 10. The MLP index lost 2+ to the 308s & the REIT index was fractionally lower in the 361s. Junk bond funds were little changed & Treasuries crawled higher. Oil & gold were each lower again.
Euro-area inflation failed to accelerate in Aug, adding to signs
that the area's economic outlook deteriorated ahead of a ECB meeting next week. Consumer prices rose 0.2%
in Aug from a year earlier. The estimate
was for an increase of 0.3%. 2 months after the UK
Brexit vote, the 19-nation economy is beginning to show signs of
faltering, suggesting that more stimulus may be warranted. Business &
consumer sentiment declined & executives are warning that orders may
suffer from political uncertainty. The IMF has
already cut its forecast for euro-area growth next year & the
ECB will release new projections after its meeting
next week. Policy
makers have already deployed a raft of unconventional stimulus that
includes large-scale asset purchases, negative interest rates &
long-term loans that see banks getting paid for extending credit to
companies & households. Still, inflation remains far below the ECB
goal of just under 2%, a level it hasn't reached since early
2013. The institution predicts price growth will accelerate to 1.6% in 2018. Core
inflation slowed to 0.8% from 0.9% a month
earlier. German inflation unexpectedly decelerated to 0.3%, while consumer prices extended their decline in Spain. Euro-area unemployment remained unchanged at 10.1%, according to a separate release. The inflation report comes one day after a European Commission survey
showed economic confidence declined across most countries & most
sectors in a delayed reaction to Britain's decision to leave the
EU. The data may reopen the debate about more stimulus at
the ECB's Sep 8 meeting.
Companies added workers to US payrolls in Aug in line with
projections, contributing to signs of a steady labor market, data from
ADP Research Institute. Private
payrolls climbed 177K (forecast was 175,K) after a revised
194K gain in Jul (more than initially estimated). Goods-producing industries, which include manufacturers & builders, reduced headcounts by 6K. Service providers’ payrolls rose 183K. Hiring managers are taking on workers to meet sales, evidence of
sustained job-market progress that Federal Reserve officials will weigh
when they meet in Sep.
“The
American job machine continues to hum along,” Mark Zandi, chief
economist at Moody’s Analytics said. “Job creation remains strong, with most industries and
companies of all sizes adding solidly to their payrolls. The U.S.
economy will soon be at full employment.” Moody's produces the figures
with ADP. Companies
employing 500 or more workers increased staffing by 70K jobs;
payrolls rose by 44K at medium-sized businesses (those with 50-499 employees) while small companies' payrolls advanced 63K.
The Institute for Supply Management's gauge of factory activity in the
Midwest region fell to 51.5 in Aug from 55.8 the month prior. The forecast was for a smaller decline to a reading of 54.0. Readings above
50 point to expansion, while those below indicate contraction.
Not much going on today in the slowest week of the year. Stock averages have been trading sideways for most of the summer & that trend should not change until after Labor Day (at the earliest). Oil tried to rally, hoping to top 50, but that effort failed. Gold is sliding lower from the mid 1300s to the low 1300s.
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