Asian shares hit 2-month high on solid US job growth

TOKYO - Asian shares hit two-month highs on Monday, extending their sharp gains in the previous four sessions, following upbeat U.S. jobs data and rebound in oil commodity prices.

Investors also look to Chinese markets' reaction to Beijing's new economic plans, which include a cut in the economic growth target to a range of 6.5 percent, and a moderate increase in the fiscal deficit to 3 percent of GDP.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.5 percent, paring about 80 percent of its losses since the start of 2016. Japan's Nikkei slipped 0.3 percent.

MSCI's broadest gauge of the world's stock markets also hit a two-month high on Friday, posting its largest weekly gain since October.

U.S. nonfarm payrolls grew by 242,000 jobs last month, beating forecasts for 190,000 new jobs, while the participation rate rose for three months in a row.

The upbeat figures, coming after data last week showing some signs of recovery in the U.S. manufacturing sector, eased worries that the U.S. economy could be slipping into recession under the weight of low oil prices and a stronger dollar.

"The U.S. job data helped to push back excessive pessimism on the U.S. economy. A brightening U.S. economic outlook is underpinning various risk assets," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

On the other hand, average U.S. hourly wages unexpectedly dipped by 0.1 percent after a surprisingly strong 0.5 percent increase in January.

That there is no sign of inflation in wages despite a tightening in job markets, suggesting the Federal Reserve can afford to wait longer before raising rates.

As a result U.S. interest rate futures are now pricing in only one rate hike by the end of year, with virtually no chance seen of a rate hike in March.

The U.S. 10-year bond yield rose to one-month high of 1.902 percent on Friday but still way below its levels around 2.25 percent in December when the Federal Reserve raised interest rates for the first time in almost a decade.

That limited the dollar's attraction against other currencies. The dollar's index against a basket of six major currencies dipped to near two-week low of 97.019 on Friday and last stood at 97.328.

The euro rose to one-week high of $1.1043 on Friday and last stood at $1.0992 while the yen was little changed at 113.88 to the dollar.

The commodity-linked Australian dollar shot up to a 5 1/2-month high of $0.7444 on Friday and last stood at $0.7414.

"AUD/USD eased modestly in early thin Asian trading following the weekend commencement of China's National People's Congress (NPC). There have been no major positive surprises from the NPC so far," Commonwealth Bank currency strategist Joseph Capurso wrote in a note to clients, referring to China's 12-day annual national parliament.

Chinese Premier Li Keqiang said on Saturday China aims to keep its economy growing by at least 6.5 percent over the next five years while pushing hard to create more jobs and restructure inefficient industries.

Beijing's draft goal of running a fiscal deficit equivalent to 3 percent of GDP, while marking a rise from the previous year's target of 2.3 percent, could also disappoint some investors who hoped for higher deficit spending.

Elsewhere, oil prices hit near-three-month highs, extending their gains of about 10 percent last week.

Benchmark Brent crude futures rose to as high as $39.20 per barrel, their highest since mid-December. They last stood at $39.03, up 0.8 percent on the day.

On Friday, copper also jumped 3.6 percent to its highest level since early November.

source: www.abs-cbnnews.com

US job openings hit record high; small businesses upbeat

WASHINGTON - U.S. job openings surged to a record high in April and small business confidence perked up in May, suggesting the economy was regaining speed after stumbling at the start of the year.

The economy's stronger tone was reinforced by other data on Tuesday showing a solid rise in wholesale inventories in April, in part as oil prices stabilized.

"This is more confirmation that the economy is indeed emerging from that soft patch in the first quarter and can still pick up even faster in the next few months," said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.

Job openings, a measure of labor demand, rose 5.2 percent to a seasonally adjusted 5.4 million in April, the highest level since the series began in December 2000, the Labor Department said in its monthly Job Openings and Labor Turnover Survey (JOLTS).

Hiring slipped to 5.0 million from 5.1 million in March. Economists say the lag in hiring suggests that employers cannot find qualified workers for the open positions.

The number of unemployed job seekers per open job, a measure of labor market slack, fell to 1.6 in April, the lowest since 2007 and down from 1.7 in March.

"On balance, we read the April JOLTS data as suggesting labor market momentum remains intact in the second quarter and labor market slack continues to diminish," said Jesse Hurwitz, an economist at Barclays in New York.

The JOLTS report is one of the indicators being closely watched by Federal Reserve policymakers as they contemplate raising interest rates this year. The U.S. central bank has kept the short-term lending rate near zero since December 2008.

Tightening labor market conditions were corroborated by a separate report from the National Federation of Independent Business that showed confidence among small businesses rising to a five-month high in May.

The share of businesses saying they could not fill open positions also increased to 29 percent last month, matching February's reading, which was the highest since April 2006.

REGAINING STEAM
The economy contracted at a 0.7 percent annual pace in the first quarter and growth got off to a slow start in the second quarter, in part because of the lingering effects of a strong dollar and spending cuts in the energy sector.

But a surge in job growth and automobile sales as well as gains in May factory activity suggest the economy is strengthening.

Prices for U.S. government debt fell, while U.S. stock indexes edged up. The dollar slipped against a basket of currencies.

In a third report, the Commerce Department said wholesale inventories increased 0.4 percent in April after rising 0.2 percent in March. Inventories are a key component of gross domestic product changes.

The component of wholesale inventories that goes into the calculation of GDP - wholesale stocks excluding autos - rose 0.2 percent, prompting economists at Barclays to bump up their second-quarter growth estimate by one-tenth of a percentage point to a 2.9 percent annualized rate.

Sales at wholesalers surged 1.6 percent in April, the largest rise since March of last year. Sales had been weak since last August, in part due to the negative impact of lower oil prices on the value of petroleum goods sales.

That had led to an accumulation of inventory, leaving wholesalers with little appetite to buy more merchandise.

Petroleum sales jumped 4.9 percent in April.

At April's sales pace it would take 1.29 months to clear shelves, down from 1.30 months in March. An inventory-to-sales ratio that high usually means an unwanted inventory buildup, which would require businesses to liquidate stocks. That would weigh on manufacturing and economic growth.

Economists, however, caution against reading too much into the elevated inventory-to-sales ratio, given the role that oil prices have played in depressing the value of petroleum goods sales.

Still, they expect an inventory drawdown in the quarters ahead, which is one of the reasons for less robust second-quarter GDP growth estimates. Inventories added a third of a percentage point to first-quarter GDP.

source: www.abs-cbnnews.com

US job growth brakes sharply, clouds Fed rate hike timing

WASHINGTON - U.S. employers added the fewest number of jobs in more than a year in March, the latest sign of weakness in the economy and one likely to further delay an anticipated interest rate increase by the Federal Reserve.

Nonfarm payrolls rose 126,000 last month, less than half February's pace and the smallest gain since December 2013, the Labor Department said on Friday.

The weakness was concentrated in the goods-producing sector, which has been hurt by a strong dollar and lower crude oil prices. Leisure and hospitality also saw a sharp slowdown in jobs growth, suggesting harsh winter weather could have dragged on hiring.

While the jobless rate held at a more than 6-1/2-year low of 5.5 percent, the workforce shrank. The labor force participation rate returned to a more than 36-year low reached late last year.

"The report confirms the emerging narrative of slowing growth momentum seen in the other economic indicators. It will weaken the argument for a mid-year (rate) hike," said Millan Mulraine, deputy chief economist at TD Securities in New York.

The tepid increase in payrolls ended 12 straight months of job gains above 200,000 - the longest streak since 1994. In addition, data for January and February were revised to show 69,000 fewer jobs created than previously reported, giving the report an even weaker tone.

After its robust stretch, the jobs figures now appear more in line with other signals from consumer spending to housing starts and manufacturing that have suggested the economy grew at a sub-1 percent annual rate in the first quarter. Economists had forecast that payrolls would rise 245,000 last month.

Prices for U.S. government debt rallied as investors pushed back their expectations for a Fed rate hike, while U.S. stock index futures fell about 1 percent. The dollar dropped against a basket of currencies.

The U.S. central bank has kept overnight interest rates near zero since December 2008, but a number of officials have said an increase will likely be considered at its June policy-setting meeting. While economic growth is expected to rebound, it appears increasingly unlikely the Fed will have sufficient signs of strength in hand by then.

"Now the timing for the lift-off could be delayed to September or even to December. The June date is not off the table, however, assuming the economy and employment rebound," said Sung Won Sohn, an economics professor at California State University Channel Islands in Camarillo.

DOLLAR AND OIL HURT

The buoyant dollar and lower oil prices have combined to crimp the profits of some large companies, forcing a reduction in capital spending.

Equipment maker Caterpillar Inc has warned that lower oil prices will hurt its business in 2015, and Procter & Gamble, the world's largest household products maker, has cautioned that the dollar would hit its profits.

The dollar has gained about 13 percent against the currencies of the main U.S. trading partners since last June. Economists say the impact is equivalent to a half-point interest rate hike.

At the same time, the sharp oil price drop has curtailed U.S. drilling activity. Payrolls in the mining sector fell 11,000, reflecting ongoing weakness in oil and gas extraction. Energy producers have idled half of their rigs since October.

A harsh winter and a now-settled labor dispute at normally busy West Coast ports have also weighed on activity, as has softer global demand. Bad weather is estimated to have lopped off as much a seven-tenths of a percentage point from first-quarter growth.

Construction employment fell 1,000 last month, while manufacturing payrolls slipped by 1,000.

There was, however, some good news in the report.

Average hourly earnings increased 0.3 percent. Even so, that only lifted the year-on-year gain to 2.1 percent, in the same tepid range that earnings growth has held to for several years.

With Wal-Mart and McDonald's recently announcing pay increases for their hourly workers, wage growth could gain traction in the months ahead. Other companies, including TJX Cos Inc and health insurer Aetna, also have announced pay hikes.

Although the labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, slipped one-tenth of a percentage point to 62.7 percent in March, other measures on the Fed's so-called dashboard continued to improve.

A broad measure of joblessness that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment fell to a more than 6-1/2-year low of 10.9 percent from 11 percent in February.

The number of Americans unemployed for 27 weeks or longer also declined to its lowest point since November 2008.

In a sign that cold weather could have undercut job growth, the average work week fell to 34.5 hours, the lowest since September, from 34.6 in February. About 182,000 people said they could not get work because of inclement weather, slightly above the historical average of 141,000.

"It is possible that the colder-than-normal weather slowed hiring activity," said Lewis Alexander, chief economist at Nomura Securities International in New York.

source: www.abs-cbnnews.com