While you were sleeping: US job losses slow, greenback jumps, oil slips

Monday 8th June 2009

US employers cut the fewest jobs in eight months in May, stoking optimism that the recession in the world’s biggest economy is abating, helping lift the US dollar and weighing on Treasuries.

Payrolls fell by 345,000 last month, according to Labor Department figures on Friday – less than the decline of 520,000 forecast in a Reuters survey, while losses for March and April were revised to more moderate declines. The unemployment rate climbed to 9.4%, the highest since 1983, from 8.9% in the previous month as more people signed up to look for work.

The number of construction jobs lost slowed to 59,000 after a decline of 108,000 in April. Manufacturing job losses widened to 156,000 in May from 154,000 in April. Some six million jobs have disappeared in the US since the recession began.

US consumer borrowing tumbled by a greater-than-expected US$15.68 billion in April, from a decline of US$16.57 billion in March, according to Federal Reserve figures.

Consumer credit fell at an annual pace of 7.4% to US$2.5 trillion, the biggest drop since December 1990. Revolving credit dropped 11% to US$931 billion in April while non-revolving credit fell 5.3% to US$1.593 trillion.

The US dollar rose against a basket of six major currencies. The ICE Futures' dollar index climbed to 80.67 on Friday from 79.47 the previous day.

The dollar climbed 2.1% to 98.64 yen. The euro fell about 1.5% to $1.3972 and edged up 0.6% to 137.78 yen.

US Treasuries declined after the jobs figures, with shorter-dated debt yields gaining amid speculation the Federal Reserve may move to lift interest rates from near zero as soon as late 2009.

The yield on 10-year notes rose 12 basis points to 3.83% while the two-year note climbed to a yield of 1.23% from 0.96%. The 30-year bond yield increased five basis points to 4.63%.

The gap between two-year and 10-year yields widened to as much as a record 281 basis points.

US stock indexes ended mixed on Friday. The Dow Jones Industrial Average edged up 0.2% to 8763.13 and the Chicago Board Options Exchange Volatility Index, or VIX, eased 1.9% to 29.62, a sign that investor fear is abating.

Boeing Co. climbed 4.1% to US$52.65 and Hewlett-Packard climbed 3.5% to US$37.35. Wal-Mart Stores Inc., the world’s biggest retailer, rose 0.4% to US$51.07 after announcing plans to buy back US$15 billion of stock.

Citigroup fell 3.1% to US$3.46, rounding out its last full week on the Dow, to be replaced by Travelers Cos. General Motors, which is being replaced by Cisco Systems Inc., gained 16% to 86 cents. Cisco rose 1% to US$19.87.

The Standard & Poor’s 500 slipped 0.3% to 940.09. Communications equipment manufacturer Ciena Corp. fell 7.4% to US$10.77, Harley Davidson dropped 6.6% to US$17.47. Newmont Mining slid 5.5% to US$44.84 as prices of metals fell.

Copper fell after the jobs data helped lift the U.S. dollar, reducing the appeal of commodities as a hedge.

The Reuters/Jefferies CRB Index fell 0.7% to 257.92, its third decline in four days.

Copper futures for July fell 0.7% to US$2.284 pound on the New York Mercantile Exchange, while rounding out a 3.9% weekly gain.

Crude oil dropped from a seven-month high after the greenback strengthened, edging back from an intraday high of US$70.32.

Crude oil for July delivery slipped 0.5% to US$68.44 a barrel on the New York Mercantile Exchange. Gold was at US$953.80 an ounce.

Stocks in Europe climbed, with the Dow Jones Stoxx 600 Index rising 0.6% to 210.76 on the US jobs data and figures showed Chinese manufacturing grew for a third month in May.

Rio Tinto Group climbed 7.2% after raising new capital and announcing an iron ore venture with BHP Billiton, eschewing a deal with China’s Chinalco. BHP rose 5.4%.

Renault SA jumped 14% and PSA Peugeot Citroen gained 5.5% after figures from the French Carmakers’ Association showed auto sales gained 12% in May.

Bank of Ireland rose 15% and Allied Irish Banks Plc rose 11% on optimism the lenders will be in better shape after strengthening their balance sheets.

The UK’s FTSE 100 rose 1.2% to 4438.56 and Germany’s DAX 30 gained 0.2% to 5077.03. France’s CAC 40 climbed 0.8% to 3339.05.

UBS AG strategists said European stocks look relatively better value than those in the US, reversing a position it has held since 2007 and lifting its recommendation for the euro-region to “overweight,” according to Bloomberg.

Businesswire.co.nz

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