CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

Shockingly bad US payrolls adds weight to calls for QE3 and sends FTSE sharply lower

Article By: ,  Financial Analyst
July 8, 2011 6:02 PM

A shockingly bad set of US employment numbers on Friday afternoon sent stock indices sharply lower, with investors questioning the strength of the US economic recovery.

US non-farm payrolls badly missed market expectations, showing a meagre rise of 18,000 jobs in June, worse than May’s downwardly revised 25,000 jobs. The market had anticipated a rise of 90,000 jobs. Private payrolls were no better either, adding 57,000 jobs when the market was looking for 110,000, with May’s amount also downwardly revised. The unemployment rate rose form 9.1% to 9.2%. Everywhere one looks through the jobs numbers, there is not one inch of positivity about them.

These are a shocking set of US jobs numbers that will immediately raise questions about the strength of the US economic recovery and undoubtedly there are also going to be calls on the Federal Reserve to start QE3 soon to combat the drop in US activity.

The reaction in the markets to the jobs figures was quick and brutal. The FTSE 100 Index lost 75 points in the first minute after the data came out, a huge drop which, given the strong rally seen in equities over the last two weeks, is completely justified. There had  been a degree of heightened optimism before the release of the jobs numbers, with investors taking their lead from the much better than expected US ADP employment figures yesterday. This has most certainly exacerbated the situation today.

Investors fled risky asset classes en masse in the afternoon session, seeking defensive safe havens such as gold and the Japanese yen. As a result, gold hit a new two-week high above $1540 whilst the dollar/yen pair fell sharply by 0.7% below the 81.0 level.

What will the Fed do?
After the two weeks of rallies that equities have seen, June’s US jobs figures are a really bitter pill to swallow going into the weekend. The question now will be what will the Fed do? It’s likely that interest rates in the US will track a similar behaviour to the Bank of England and be maintained at low levels to encourage spending and growth. The main question will be whether Ben Bernanke, the Fed Chairman, is getting convinced that they need to be looking more into the possibility of a third round of quantitative easing and if so, in what size, method and time frame. Today’s jobs figures for June pose more questions than answers and as such, stock markets and the risk on/risk off mode that investors appear to be switching between almost on a weekly basis is likely to remain volatile.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024