BLBG: Highest Dollar Since March Awaits Payrolls; European Stocks Fall
Payrolls forecast to increase by 185,000, jobless rate 5%
Even 120,000 may be enough for liftoff, Commerzbank says
Share on Facebook
Share on Twitter
Speculation that even a below-consensus figure for U.S. jobs growth may keep the Federal Reserve on track to raise interest rates next month showed up strongest in foreign-exchange markets, with the dollar reaching an eight-month high and developing-nation currencies weakening.
The greenback gained against all but two of its 16 major peers, while Kazakhstan’s tenge fell to a fresh record low. Stocks slipped in Europe, led by luxury-goods producers after an unexpected drop in sales at Richemont, the maker of Cartier jewelry. Shares in Shanghai extended gains after entering a bull market and U.S. crude rebounded from a two-day slide.
The dollar has surged as Fed officials including Chair Janet Yellen reiterated they may well lift rates next month if the data support it. Nonfarm payrolls rose by 185,000 in October and the unemployment rate dropped to 5 percent, Bloomberg surveys of economists show. St. Louis Fed President James Bullard estimated payroll increases of between 100,000 and 125,000 a month would be consistent with economic growth, according to an interview with Reuters.
The Fed “has already somewhat made up its mind and the data has to really surprise strongly to change its mind,” said Thu Lan Nguyen, a foreign-exchange strategist at Commerzbank AG in Frankfurt. “If the number comes in around 180,000 it will support the U.S. dollar. Below that -- even at 120,000 -- I don’t think will be reason for the Fed to cancel the liftoff.”
Currencies
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, rose 0.1 percent to 1,220.88 at 7:27 a.m. in New York, after touching 1,220.90, the highest since March. A move above 1,222.94 would see the index reach the highest since it started tracking data in 2004.
Futures traders now put the odds of a December rate increase at 56 percent, up from 50 percent a week ago and 36 percent last month. The calculation assumes the effective fed funds rate averages 0.375 percent after the first increase, compared with the current zero-to-0.25 percent target range.
“Given the market has moved in recent days to price in a more-than 50 percent chance of a Fed hike by year-end, the onus on the data has shifted,” Kymberly Martin, a markets strategist in Wellington at Bank of New Zealand Ltd., wrote in an e-mail to clients. “It will need to be at least in line with expectations to sustain the current level of the dollar.”
The dollar advanced less than 0.1 percent to $1.0878 against the euro, after appreciating to $1.0834 on Thursday, the strongest since July. It has gained 1.3 percent this week. The U.S. currency rose 0.1 percent to 121.93 yen, having advanced to 122 on Thursday for the first time since Aug. 24.
The tenge plunged to as weak as 311.04 per dollar before paring its loss. Economists had predicted that the currency would stabilize once it reached 300 against the dollar -- a mark hit Thursday -- according to the median of eight analysts polled Nov. 2-4. The central bank postponed Friday’s interest-rate meeting and said it would protect foreign-currency reserves by cutting the amount of dollars it sells to support the tenge.
Turkey’s lira slid 0.5 percent against the dollar, paring the week’s gain to 1.1 percent. The new AK Party government will keep its promise to increase minimum wages, interim Finance Minister Mehmet Simsek said in an interview with NTV in Ankara.
Stocks
The Stoxx 600 fell 0.7 percent, with 16 of its 19 industry groups retreating. Cie. Financiere Richemont SA slid 8 percent and shares of LVMH Moet Hennessy Louis Vuitton SE and Swatch Group AG lost at least 4.4 percent.
BHP Billiton Ltd. declined 5.5 percent after dams burst at a Brazilian iron ore project the company owns along with Vale SA.
ICAP Plc jumped 7.6 percent after Tullett Prebon Plc said it’s in talks to buy ICAP’s voice-broking business. Tullett’s shares rose 9.7 percent.
Standard & Poor’s 500 Index futures expiring in December slipped less than 0.1 percent. The underlying gauge is heading for its sixth straight weekly advance, the longest streak in 11 months.
Emerging Markets
The MSCI Emerging Markets Index fell 0.8 percent. The gauge has risen 1.1 percent this week, set for the sharpest gain since the five days through Oct. 9, on growing optimism that China’s economy is stabilizing.
Taiwan’s Taiex index fell 1.8 percent, the steepest loss since Sept. 23 as Acer Inc. sank 6 percent after reporting a quarterly operating loss and Largan Precision Co. declined 7.5 percent on a slowdown in sales growth.
South African stocks fell for a second day, sending the benchmark gauge down 1.8 percent. Lonmin Plc led the decline, sliding 15 percent and extending this week’s loss to 33 percent. The world’s third-biggest platinum producer threatened this week to shut down if it doesn’t get shareholder funding.
In China, the Shanghai Composite Index added 1.9 percent. The measure entered a bull market Thursday, just two months after a stock rout made it one of the worst-performing indexes in the world. Chinese regulators took extreme action to stanch the selloff, including banning major stockholders from selling shares and curbing the practice of short selling.
The Hang Seng China Enterprises Index retreated 0.6 percent in Hong Kong, paring its gain since Oct. 30 to 1.5 percent. Brokerages have led the advance this week amid speculation that a trading link with the southern city of Shenzhen may soon open and that the worst period for Chinese shares has passed.
Bonds
Yields on 10-year U.S. Treasuries were little changed at 2.23 percent, following a four-day increase as bets on a Fed move next month crept up.
The yield on the Bloomberg U.S. Treasury Bond Index climbed to 1.64 percent Thursday, the highest level since July 13. The gauge is headed for a third weekly loss, with the decline totaling 1.2 percent.
“Yields may rise more,” said Yoshiyuki Suzuki, head of fixed income in Tokyo at Fukoku Mutual Life Insurance Co., which oversees $54 billion. “In the last few days, people have started to think the Fed will hike interest rates in December. After this number, people may have much more confidence that the Fed will do it.”
European bonds pared this week’s declines, with the yield on 10-year German bunds falling one basis point to 0.60 percent. The rate on similar-maturity Italian bonds dropped two basis points to 1.68 percent. Spanish securities were little changed.
The rate on 10-year U.K. interest-rate swaps fell to the lowest level since January 2014 relative to gilts as balance-sheet constraints on bond dealers undermine prices on government debt.
Commodities
Oil traded near $45 a barrel as prices recovered from the biggest two-day decline in three weeks. Futures gained as much as 1 percent in New York.
Gold pared a third weekly loss as investors awaited the monthly U.S. jobs report. Bullion for immediate delivery was 0.5 percent higher at $1,108.89 an ounce. Prices are still down 2.9 percent this week, heading for the biggest drop since July.
