Börse & Märkte

Taper On Or Taper Off? Mixed Bag NFP Leaves Market None The Wiser Over Fed's Next Possible Move On Stimulus

US adds 162k jobs in July, falling short of expectations of 184k but the unemployment rate dropped to 7.4% from 7.6% - a contrasting report leaving the market feeling rather confused about what this means for tapering by Fed. Taper-on or taper-off? The latter, most likely, as the momentum in the labour market is clearly not as strong as many bulls in the market had expected.

 

Sure, the unemployment rate ticked lower to 7.4% but that’s still nearly a 1% off the Fed’s target of 6.5% on the unemployment rate. Moreover, the drop in jobless rate reflects the fall in the participation rate to 63.4% from 63.%. Further, there were negative revisions to June figure, down to 188k from 195k and May to 176k from 195k. And, average hourly earnings fell to -0.1% from -0.2% while average weekly hours also fell -0.1%.

 

So when reading these figures, the best description is that July’s report is a mixed bag which provide us little fresh clues about the Fed’s next possible action on stimulus measures. There’s a big bright sport in the report; the number of unemployed people in the US is down 1.2million so far in 2013, a respectable improvement in labour market conditions. That said, Fed will refrain from tapering this year as we need to see clear signs of sustainable improvement and stronger momentum in the jobs market before tapering can really start.

 

Summarizing the market reaction: USD of course dropped as the report raises the prospects of more money printing by the Fed which dilutes the value of the currency. The euro meanwhile shot higher, now near the 1.3270 level against the dollar versus 1.3205 before the report.  Gold however pared most of its session gains [it was down over 25 bucks at one point but is now lower by a buck].

 

The biggest move was registered by US 10-year Treasury yields which fell 10 basis points in a matter of seconds – yields are now at around 2.63%. Core government bonds rose [gilts and bunds pared losses], a natural reaction to waning risk-sentiment. Stocks markets initially did little here in Europe but have weakened a tad over the past half hour – FTSE100, EUROSTOXX50, DAX all trade flat. US stock futures however did erase gains, turning red with the DJIA front month futures contract off 13 points and the corresponding S&P500 contract off 1 point.