U.S. private hiring slows in June, weekly jobless claims rise
U.S. private employers hired fewer workers than expected in June and applications for unemployment benefits last week increased for a third straight week, suggesting some cooling in the labor market as it nears full employment. The ADP National Employment Report showed on Thursday that private sector payrolls increased by 158,000 jobs last month, stepping down from the 230,000 positions created in May and below economists’ expectations for a gain of 185,000. The report, jointly developed with Moody’s Analytics, came ahead of the Labor Department’s more comprehensive non-farm payrolls report on Friday, which includes both public and private-sector employment. According to a Reuters survey of economists, nonfarm payrolls likely increased by 179,000 last month after May’s 138,000 gain. The unemployment rate is forecast unchanged at 4.3 percent. The ADP report has a spotty record predicting nonfarm payrolls, but June’s modest job gains together with a steady rise in first-time applications for jobless benefits could raise concerns that the labour market is losing some momentum.
Fed Officials Divided on When to Begin Balance-Sheet Unwind
A divided Federal Reserve policy committee couldn’t reach an agreement in June on the timing of when to begin shrinking its massive balance sheet, according to minutes of the meeting. “Several preferred to announce a start to the process within a couple of months,” the minutes of the June 13-14 meeting released on Wednesday in Washington showed. “Some others emphasized that deferring the decision until later in the year would permit additional time to assess the outlook for economic activity and inflation.” U.S. central bankers in June raised the benchmark lending rate for a second time this year to a range of 1 percent to 1.25 percent, while describing monetary policy as “accommodative” in their statement. They reiterated their support for continued gradual rate increases, according to the minutes. Fed officials updated their balance-sheet policy in the gathering, laying out a path of gradual reductions with caps. The central bank wants to start winding down the $4.5 trillion bond portfolio without roiling longer-term interest rates, while gradually raising the policy rate. The minutes indicated that the committee wants to begin the balance-sheet process this year.
Oil rises after signs of U.S. demand, but supply threat remains
Oil rose on Thursday, recovering some ground after a surprisingly upbeat picture of U.S. demand halted the previous day’s slide, although the prospect of oversupply in 2018 prompted yet more analysts to cut their price forecasts. Brent crude futures were up 76 cents on the day at $48.55 a barrel by 1307 GMT. The price fell as much as 4.6 percent on Wednesday, before closing down 3.7 percent, its biggest one-day drop in a month. U.S. West Texas Intermediate crude futures were up 79 cents at $45.92 a barrel. Data from the American Petroleum Institute (API) on Wednesday showed U.S. crude inventories fell more sharply than expected, down 5.8 million barrels in the week to June 30, against forecasts for a draw of 2.3 million barrels. This comes on the heels of last week’s set of data releases that painted a less worrying picture of supply in the United States, where crude output has moderated. “A change in fortunes is afoot this morning as the energy complex recoups some losses after an upbeat report from the API on U.S. petroleum stocks,” PVM Oil Associates analyst Stephen Brennock said in a note. The oil price is heading for a 1.3 percent rise this week, but has tumbled from one-month highs just below $50 following evidence of rising exports and increased production from the Organization of the Petroleum Exporting Countries, despite the group’s commitment to bolster the market by cutting output.
China June data to show steady growth, debt crackdown dims outlook
A raft of Chinese data in coming weeks is expected to show steady growth in the world’s second-biggest economy, but government measures to rein in the housing market and debt risks are likely to drag on activity over the next few quarters. Many analysts say Beijing’s deleverging campaign will pressure growth as the property sector cools in response to policy curbs, even as top leaders have pledged to maintain economic stability ahead of a key party meeting later this year. “We expect June’s data release to show overall steady growth with industrial production momentum maintained,” economists at UBS said in a research note. “Slower credit growth and higher funding costs due to supervisory tightening are expected to have an effect on fixed-asset investment and activities later in the year.” China’s industrial output is seen up 6.5 percent in June from a year earlier, matching the rise in May, according to a Reuters poll of 34 economists. Retail sales were expected to grow 10.6 percent, easing slightly from a 10.7 percent rise in May, while fixed-asset investment was predicted to increase 8.5 percent in January-June from a year earlier, versus a rise of 8.6 percent in the first five months, the poll showed. Authorities have tightened rules to force banks to deleverage – as part of steps to control debt risks, pushing up money market rates that have started to spill over into the real economy.
German Bund yields hit fresh 18-month high, euro edges up after ECB minutes
German government bond yields hit new 18-month highs, while the euro edged higher on Thursday after minutes from the ECB’s most recent meeting showed the central bank left the door open to removing its bond-buying pledge. ECB rate setters meeting last month discussed dropping from their policy message a long-standing pledge to expand or extend the bank’s bond-purchase programme if necessary, minutes of the meeting showed on Thursday. That added to selling pressure in bond markets, already uneasy about the prospect of monetary stimulus being scaled back in the months ahead. Germany’s benchmark 10-year Bund yield rose on Thursday to a fresh 18-month high at 0.56 percent. The euro inched up to trade at $1.1375, its highest in two days, after the minutes, leaving it up 0.2 percent on the day in a quiet trading session.