Overnight, all of the Asian indices were in the green on news
that the Chinese government had set up several special economic
zones within the country, which have typically resided in the
Guangdong Province. Japanese indices were up more up than 1.5%
while Chinese indices all closed in positive territory. Yesterday,
while US markets were closed, the ECB and BoE took extraordinary
steps to give forward guidance on monetary policy, something
neither central bank has done in their history.
The biggest market mover today in what was otherwise a quiet
session was the June employment report. Nonfarm payrolls rose by
195,000 vs. an estimated gain of 165,000 though unemployment
remained unchanged at 7.6%. However, the 3-decimal unemployment
remained nearly unchanged at 7.557% from 7.555% the month prior,
which is very close to rounding down to 7.5%. There were a number
of positive details to the report including a rising average weekly
earnings, a rising participation rate, and an increase in the
number of people who voluntarily left their jobs. On the other
hand, the number of workers who took part-time employment due to
economic reasons rose at an alarming rate. Lastly, the biggest
market mover came from the positive revisions of 70,000 payrolls
over the prior two months.
The Treasury market was the most volatile following the employment
data as it priced in an accelerated pace of increases in the Fed
funds rate over the coming years. The 10-year Treasury yield rose
22 basis points to 2.72%, the largest one-day move in interest
rates this year. In response, a number of mortgage originators
raised the interest rate on their loans by 0.25%.
Equities remained in positive territory despite the massive shock
to interest rates.
S&P 500 future
s (INDEXSP:.INX) were up 16 points to 1625 at the time of the
employment report and at one point touched negative territory in
the early going. Later in the day, prices stabilized slightly below
this level with the number of advancing stocks roughly equal to the
number of declining stocks. Real estate investment trusts (REITs)
and other interest rate-sensitive sectors were the clear
underperformers while financials and tech led.
Monday's Financial Outlook
Monday will bring May growth in consumer credit data, which is
forecast to rise by an adjusted rate of $12.5 billion from the
month prior. May will be the first month where consumers have
experienced sharply higher interest rates so the outcome will be
important in determining whether or not it has affected loan
Globally, Germany and Switzerland will release industrial
production and the Sentix eurozone investor confidence survey will
be released. Additionally, Canada will release housing starts and
building permits from June.
) will report after the close and kick off 2Q earnings. The other
notable report for Monday is