Although crude oil added +0.3% to settle at 70.82 Thursday, trading momentum was weakened as the US reported a series of disappointing data. Investors worried that economic recovery might not come as expected and thus drove capital away from risky assets.
US initial jobless claims increased to 551K in the week ended September 26 from 534K in the prior week. The market had anticipated a much more modest rise to 535K. After making a peak in March, initial jobless claims have dropped -18% in 26 weeks. However, the decline was rather gradual compared with previous recessions in 1970s and 1980s. The sluggishness in the falls in claims signals recovery in the job market is slow.
ISM manufacturing index slid to 52.6 in September from 52.9 in the previous month. The market forecast an improvement to 54. Although the index suggested manufacturing activities remained in expansion, decline in some components, such as new orders (Sep: 60.8; Aug: 64.9) and productions (Sep: 55.7, Aug: 61.9), indicated the sector remained vulnerable.
Stock market plunged as investors concern about the employment and growth outlook in the economy. The Dow Jones Industrial Average sank -2.1% to 9509 while S&P 500 Index lost -2.6% to 1030. Today in Asia, the MSCI Asia Pacific Index slips -2%. Japan’s Nikkei 225 Stock Average loses -2.7% to 9715 although the nation’s unemployment rate surprisingly fell to 5.5%, compared with consensus of an increase to 5.8%, in August from 5.7% a month ago. Japan’s household spending also unexpectedly gained +2.6% yoy in August after plummeting -2% in July.
The market’s focus is on US’ employment report today. Payrolls should have dropped -187K in September (-216K in August), sending the unemployment rate to 9.8% from 9.7% in August.
Gold price pulled back and closed below 1000 Thursday as USD rallied. Apart from uncertain economic outlook, the dollar advanced +0.65 against the euro because ECB President Trichet said that euro’s recent appreciation has been too much and disorderly movement in the currency market will have adverse impact on economy. The worst performers were commodity currencies in which Australian dollar, New Zealand dollar and Canadian dollar plunged -1.6%, -1.2% and -1.4% respectively.
Recent strength in gold price hurt physical demand. Besides India, Turkey reported that imports were down -86% mom to 1.7 metric tons in September. In the first months, total imports in the country were 32.9 metric tons, compared with 164.6 metric tons in the same period last year.