Macro
The non-farm jobs report was remarkably close to the consensus estimate. Last week we noted Barron’s calling for 212,000 with the actual print coming at 223,000. As the title of this post implies, on the surface it looks like a Goldilocks number. Fed Governor Charles Evans talked during the week (before the report) and said that this number would need to be at least 200,000 to even consider hiking rates this year. Of course it was greater than 200,000 but not so much greater that it puts a June rate hike back on the table.
There were no real surprises in the report. The headline unemployment rate came in at 5.4%, the broader U6 unemployment rate down ticked to 10.8%, hourly earnings were a slight disappointment with an increase of 0.1% and the labor force participation rate stayed in the neighborhood it has been in for months at 62.8%. There was a surprise in the revisions. As weak as the March data was, remember it was 126,000, it was revised down to 85,000 new jobs.
Domestic equities had a bumpy ride to a flat finish. The Dow Jones Industrial rose 91 basis points, the S&P 500 had a 0.36% lift, the NASDAQ lost five basis points and the Russell 2000 was up 0.54%. Markets were down 1.5-2% through late Wednesday, rallied on Thursday and followed through higher on Friday.
Foreign equities had more pronounced moves for the week. The DAX in Germany rallied 2.23%, the FTSE 100 gained 93 bp and the CAC 40 in France gained 65 bp. After a torrid first four months, Shanghai cooled its heels last week with a 5.29% decline. The Hang Seng gave back 1.93%, the Nikkei 225 fell by 3.19% and Australia dropped 3.09%. Asian markets appear to have been most influenced by ongoing threats to Chinese GDP growth.
Global bond yields continued to back up. The US Ten Year Treasury closed the week up four basis points at 2.15% but before the jobs report on Friday it got as high as 2.24% on Wednesday.
A couple of weeks ago we observed growing sentiment that the German bund would soon trade with a negative yield and of course that has not been the case. Shortly after Bill Gross called the bund the short of the century the yield began to skyrocket, closing this past week at 0.54% after closing the week before at 0.37%. The yield on the French OAT jumped 19 basis points to 0.84%, the Swiss ten year moved a little further from negative territory to close with a positive nine basis point yield, Spain now yields 1.67% and Italy yields 1.68%.
