By Greg Peel
The Dow closed down 25 points or 0.2% while the S&P lost 0.3% to 1683 and the Nasdaq dropped 0.1%.
In Australian terms, yesterday's jobs data were a bit of a shocker. I say in Australian terms because if you were Europe or the US for example, you'd kill for these numbers. But aside from the fact economists expected 10k jobs to be added and about 11k jobs were actually lost, we saw a rather disturbing combination of an increasing unemployment rate and a decreasing participation rate.
The unemployment rate rose to 5.8% in August, up from 5.7% in July, up from 5.1% last August, and just below the GFC peak of 5.9%. Economists had predicted 5.8%, but on the assumption more people would participate in job seeking, which is a mild positive. But the participation rate actually fell 0.1% to 65.0%, and that means a double negative.
One saving grace is the hours worked figure, which rose by 0.1% to be 2.0% higher than a year ago. Hours worked have been trending upwards post-GFC, suggesting businesses have been squeezing more hours out of management and staff in order to avoid hiring. Presumably this has been productive, but eventually this dam must break and employers will simply need more employees, assuming yet more hours are needed.
But not in the short term. This unemployment result set the market to assuming another rate cut must be forthcoming sooner rather than later, with a 0.6% fall in the Aussie to US$0.9272 testament. On the other side of the coin is a bubbling investment housing market and the RBA has already appeared to pull back to a neutral stance once more. CBA's economists, for one, believe 2.5% will prove the trough.
Over on Wall Street not much was going on last night and the indices bungled their way along in a small range before drifting lower at the close. There have never been four consecutive days of triple-digit gains in the Dow and last night was certainly not going to be history making. An announced US$6-8bn share buyback by Disney helped make the Dow look better than it should have been.
The Syrian situation has reached gridlock with the Assad regime suggesting it will hand over chemical weapons only if the US and allies stop arming the rebels. That story's going nowhere for now. And the countdown is still on for the September 18 release of the Fed's next policy statement.
So what spooked gold? Physical gold fell US$44.10 or 3.2% to US$1320.90/oz last night. Gold has been shuffling lower as the Syria premium has waned and as expectations for Fed tapering have intensified. Last night gold traded down through technical levels and in came the selling, with buyers apparently withdrawing to the safety of the sidelines. The move had nothing to do with the US dollar, which was steady at 81.52 on its index.
After also correcting on the waning Syria premium, the oils bounced back last night after the International Energy Agency issued an upbeat forecast for 2014 global demand. Global oil demand is forecast to rise by 1.2% "as the underlying economic situation continues to improve". Brent rose US$1.00 to US$112.63 and West Texas rose US$1.19 to US$108.75/bbl.
It was an oddly divergent session on the LME last night. Copper broker technical support and fell 1.3% and tin fell near 2% but aluminium rose 0.5% and the others were flat.
Spot iron ore rose US10c to US$135.20/t.
The SPI Overnight fell 9 points or 0.2%. A down-day today would prevent a six-day winning streak.
After a quiet week economically, tonight the US sees inventory, retail sales, consumer sentiment and PPI data.
Rudi will appear on BRR Media's Round Table at 1pm. The powerpoint slides of "The Big Confusion That Is The Share Market", the presentation he gave in Chatswood this week, are available via the Special Reports tab on the website.