Stocks gain as tepid jobs report stokes hopes for low rates

by Frankie Norman September 3, 2016, 4:06

While policymakers in the USA showed a rather tentative signs of their willingness to hike interest rates before December, increasingly pointing to the data-dependent approach, let's see what market analysts and economist expect of the August labor market report.

The economists were polled following Friday's monthly payrolls report, which showed USA employers added fewer-than-expected workers in August. US stocks were poised for a higher open, with Dow and S&P 500 futures both up 0.2 percent. The Standard & Poor's 500 index rose 19 points, or 0.4 percent, to 2,179.

After two months of blockbuster growth, with USA employers adding more than 270,000 jobs in both June and July, the economy slowed dramatically in August, adding a modest 150,000 new jobs and barely raising wages for workers.

The disappointing report from the Labor Department comes in slightly below economist expectations of 180,000 jobs.

Ready for the jobs report: The U.S. government posts its highly anticipated August jobs report at 8:30 a.m. ET. Healthcare employment continued to trend up during the month (adding 14,000 jobs), but rose at a slower pace than the 39,000 job average over the past year. The current mid-point for the federal funds rate is 0.38 percent.

European markets are mostly rising in early trading.

James Knightley, senior economist at ING, agreed a September rate hike was off the cards, saying a rise was now more likely in the first quarter of next year. This has put pressure on the Federal Reserve to tighten monetary policy a bit with an interest rate hike, which it last did in December.

Most Asian markets were listless Friday as investors awaited key US job data that could influence the Fed's interest rate policy. Hong Kong's Hang Seng rose 0.5 percent to 23,275.83 and the Shanghai Composite Index in mainland China slipped 0.1 percent to 3,060.06.

Still, the payrolls gain added to July consumer spending, residential construction and durable goods orders in suggesting a pickup in economic growth after output rose 1.0 percent in the first half of the year. Reynolds American added $1.04, or 2.1 percent, to $50.79 and Altria Group picked up 69 cents, or 1 percent, to $67.01. Average hourly earnings increased three cents or 0.1 per cent in August after a solid 0.3 per cent rise in July. Benchmark U.S. two-year note yields climbed after each of the past two payrolls reports showed employment increases that topped forecasts.

Gold rose 0.8% to $1,322.10 an ounce.

USA short-term interest rate futures rose, indicating trader expectations that the Federal Reserve could soon lift interest rates had been reduced.

The dollar was flat at 103.280 yen after coming down from a one-month high of 104.00 overnight.


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