Global markets wrapped up the week in unspectacular style on Friday, with investors finding little solace in the latest round of US jobs data. The US economy created 114,000 jobs in September according to the latest non-farm payrolls report released by the Bureau of Labor Statistics. Although the headline number was in-line with consensus estimates, the official unemployment rate slid to 7.8 percent from 8.1 percent in August, outpacing estimates of a rise to 8.2 percent. The last time the jobless rate was below 8 percent was in January of 2009, which peaked at 10.2 percent later in the year. Positive revisions to previous reports contributed to a decline in the official jobless rate, with employment growth for July revised from 141,000 to 181,000, and August was revised from 96,000 to 142,000. The survey showed employment in health care and transportation underpinned employment growth. According to data, the number of citizens classed as either marginally attached or discouraged workers numbered 2.5 million, unchanged from a year earlier.
Across the Atlantic, markets continued to pin hopes on a near-term bailout for Spain, despite no real indication the Spanish Government is leaning towards an formal request in the near-term. Deputy Economic Minister Fernando Jimenez Latorre told journalists on Friday “What we are doing is talking to the European institutions and we are analysing the options.” Peripheral debt yields continued to fall with optimism over a likely near-term Spanish bailout remaining a key directive. The 10-yr benchmark yield slid to 5.65 percent by the close, down 21 bps on the day suggesting market perception over Spain’s economic fortunes remain at least stable. Likewise, the Euro also reflected this relative stability with price action continuing to forge higher despite a notable shift to the perceived safety of the greenback and Yen.
The Aussie dollar led risk currencies lower coinciding with a step reversal from US equity markets. Tuesday’s interest rate cut created a clear downside inflection point for the Aussie dollar and its appeal continue to wane over the week despite moderate strength from traditional risk barometers such as the S&P500. The local unit briefly touched near 3-month lows of 101.51 US cents in the last hour of trade as liquidity began to dry up, before closing the week an overall 1.86 percent in the red. The local macro week ahead will see the focus turn to the September jobs report which is expected to show a net gain of 5,000 new jobs added to the labour force. Although domestic factors remain conducive to currency weakness, the Aussie’s risk credentials as a high yielding currency remain firmly intact, rendering the local unit at the mercy of global risk trends in addition to local directives. Markets will remain transfixed on both sides of the Atlantic to look for the next economic signpost or event to provide the path of least resistance. US corporate earnings will also be closely watched with Alcoa Inc marking the official start to the earnings season on Tuesday.