U.S. payrolls seen rebounding in June in boost to economy
U.S. job growth likely rebounded in June as striking Verizon employees returned to work and wages probably rose steadily, more evidence the economy has regained speed after a first-quarter lull.
The U.S. Labor Department's jobs tally due on Friday is likely to show nonfarm payrolls increased by 175,000 jobs last month after a meager 38,000 gain in May, according to a Reuters survey of economists. The unemployment rate is forecast rising to 4.8 percent from an 8-1/2-year low of 4.7 percent a month earlier as some job seekers returned to the labor market.
The signs of economic strength would be welcomed by the Federal Reserve. Nonetheless, economists say the report will likely have little impact on the near-term interest rate outlook given the U.S. central bank's desire to wait on more data to assess the economic impact of Britain's stunning vote last month to leave the European Union.
Even with June's anticipated jobs bounce back, forward momentum in the labor market has slowed. Job gains averaged 282,000 per month in the fourth quarter, but employment has increased by an average of only 150,000 jobs per month over first five months of this year.
Economists say the deceleration is normal given the relatively advanced age of the economy's recovery from the 2007-09 recession, with the labor market now near full employment.
Stronger payroll gains in June would add to data on consumer spending and housing in suggesting that economic growth accelerated from the first-quarter's anemic 1.1 percent annualized rate. The Atlanta Federal Reserve Bank is currently forecasting the economy growing at a 2.4 percent pace in the second quarter.
Tightening labor market conditions are expected to start putting upward pressure on wages. Average hourly earnings are forecast increasing 0.2 percent in June after a similar gain in May. The year-on-year gain in earnings could rise as high as 2.7 percent after advancing 2.5 percent in May.
UK banks spared downgrades by S&P in mass outlook cull
Standard & Poor's carried out a mass-cull of British bank rating outlooks on Thursday in the wake of the country's vote to end its membership of the European Union, but stopped short of downgrading them despite its brutal cut of Britain's sovereign rating.
The country's big institutions including HSBC Barclays, Lloyds and well as the UK arms of banks like Santander all saw their rating outlooks cut to negative from stable, while RBS dropped to stable from positive.
The decision not to deliver full downgrades is likely to be of some relief. S&P stripped Britain of its last remaining top-notch credit rating last month following the Brexit vote, slashing it an unprecedented two grades from "AAA" to "AA".
"In our view, the "leave" result in the U.K.'s June 2016 referendum on EU membership ("Brexit") has increased the risks of adverse economic developments," S&P said in note following Thursday's banking outlook cuts.
Brexit could deliver 'significant' blow to eurozone, ECB warns
Brexit could send shockwaves around the wider European continent, delivering a “significant” blow to the eurozone, policymakers have warned.
Minutes of the European Central Bank’s latest meeting, which took place ahead of the UK’s referendum, revealed that officials were worried a vote to leave the European Union could result in “significant, although difficult to anticipate, negative spillovers to the euro area
Policymakers feared that Brexit threatened both trade and financial market shocks to the eurozone’s economic recovery. Members of the ECB’s governing council highlighted that the June 23 poll came at a time when weakness in emerging markets and other risks were weighing on the currency bloc’s outlook.
The central bank raised its concerns at a time when the prospect of a Brexit result appeared unlikely. Records of the ECB’s June 2 summit noted that “concerns over a possible leave vote… had abated somewhat until the day before the current meeting”.
Mester Says Fed Has Time To Weigh Next Rate Move
Federal Reserve Bank of Cleveland President Loretta Mester said Thursday the U.S. central bank has time to weigh the impact of the Brexit vote before making its next decision about raising short-term interest rates.
In a Wall Street Journal interview that saw her reaffirm her assessment the U.S. economy's underlying state is "very solid," Ms. Mester said "I don't think that the Fed, in terms of the setting of monetary policy, is behind the curve. We do have time to assess conditions" and see whether the unexpected U.K. vote to leave the European Union will affect the path of the American economy
"I've been one of the more positive ones in terms of the outlook for the U.S. economy, and I continue to be positive about it. But I take on board that there is increased uncertainty" which could change officials' expectations that the Fed's short-term interest rate target will rise gradually over time, Ms. Mester said.
China Foreign Reserves Unexpectedly Climb to $3.21 Trillion
China’s foreign-exchange reserves unexpectedly increased as haven assets such as the Japanese yen appreciated amid the U.K.’s decision to leave the EU.
The world’s largest currency hoard rose by $13 billion to $3.21 trillion in June, the People’s Bank of China said in a statement Thursday. That compares with the $3.17 trillion median forecast of economists surveyed by Bloomberg. The yen, which China holds as part of its reserves, advanced by 7.3 percent against the dollar in June.
"This indicates that the PBOC didn’t heavily intervene in the currency market last month as it let the yuan depreciate in accordance with market supply and demand," said Nathan Chow, an economist at DBS Group Holdings Ltd. in Hong Kong. "The yuan will drop further as Beijing apparently has a bias for depreciation due to the weaker economy, which will lead to more outflows and pressure the reserves in the second half."
Japan MOF Asakawa: Watching forex market, ready to respond if speculative moves
Japan's top currency diplomat, Masatsugu Asakawa, said on Friday he was watching the foreign exchange market with a sense of urgency, including how U.S. jobs data later in the day could affect it.
Speaking to reporters after a meeting between officials of the Finance Ministry, Bank of Japan, and the Financial Services Agency to discuss market developments, Asakawa also said the government was ready to respond to any speculative moves.
"If there are speculative moves in the currency market, we will take steps as necessary," he said.
Oil rebounds from two-month lows, outlook seen volatile
Oil prices rebounded on Friday, bouncing off two-month lows hit in the previous session when prices fell 5 percent on news that the U.S. weekly crude draw missed some forecasts.
Brent crude futures were trading at $46.92 per barrel at 0435 GMT on Friday, up 52 cents, or 1.12 percent, from their last settlement. U.S. crude was up 43 cents, or 0.95 percent, at $45.57 a barrel.
Reference: Bloomberg,The Wall Street Journal,Telegraph,The Economic Times,Reuters
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