Overseas Headlines – June 22, 2017


Jobless Claims Show Tight U.S. Labour Market Even With Increase

The slight gain in filings for U.S. unemployment benefits last week is still consistent with a resilient job market, Labour Department figures showed Thursday.


  • Initial jobless claims increased by 3k to 241k (forecast was 240k); 43-year-low of 227k was reached in February
  • Continuing claims rose by 8k to 1.94m in week ended June 10 (data reported with one-week lag)
  • Four-week average of initial claims, a less-volatile measure than weekly figure, rose to 244,750 from 243,250 in prior week

Key Takeaways

Employers are reluctant to let go of skilled and experienced workers at a time there’s a shortage of such labour. Even with the tick-up in filings, the figures are in sync with other data showing steady hiring, still-elevated job openings, and unemployment at a 16-year low. The report spans the week including the 12th of the month, the period covered by the Labour Department’s survey for the monthly jobs report. Economists typically incorporate that week’s jobless-claims numbers into their forecasts for payrolls.

Other Details

  • Prior week’s reading was revised to 238,000 from 237,000
  • Unemployment rate among people eligible for benefits unchanged at 1.4 percent
  • Louisiana was the only state with estimated claims last week




Europe Bond Curves Flatten as Inflation Softens, Supply Dries Up

European bond curves are flattening as weaker core inflation and a lack of issuance over the summer puts pressure on long-end yields. The spread between 5-year and 30-year yields in both Germany and France has tightened by around 20 basis points in the past two weeks, and hit the lowest this year on Thursday. Softer inflation on both sides of the Atlantic, coupled with falling oil prices and continued bond-buying from the European Central Bank, has seen market participants reaching for yield in longer maturities. There is just 1 billion euros ($1.1 billion) in long-dated auction supply scheduled between now and the end of August, which follows a heavy period of long-dated issuance following the second round of the French election, when France and Italy rushed to syndicate bond sales. Meanwhile, the ECB’s bond buying will continue at the current pace of 60 billion euros per month at least until the end of the year. That dynamic left NatWest Markets favouring 30-year Italian or French bonds, strategist Andrew Roberts wrote in a client note. Long-term yields are also being pushed lower by a repricing of global inflation risks, after a string of below-consensus core consumer-price readings in the U.S. and a recent drop in European inflation data.



South America:

Brazil’s c.bank cuts inflation view, says July decision data-dependent

Brazil’s central bank on Thursday lowered its inflation forecasts and reiterated that its next policy decisions remained data-dependent, signalling it was still unsure whether to reduce the pace of monetary policy easing in July. In its quarterly inflation report, the central bank cut its inflation predictions to 3.8 percent for 2017 and 4.5 percent for 2018, from 4.0 percent and 4.6 percent previously. The bank sees the annual inflation rate falling to 4.3 percent by mid-2019, below its official target of 4.5 percent. Lower inflation forecasts provide greater room for aggressive interest rate cuts, such as the 100-basis-point reductions made at the bank’s latest two meetings. They may also help policymakers reduce the country’s inflation target next week for the first time in more than a decade, to 4.25 or 4 percent, as government sources have suggested to Reuters. Brazil is slowly emerging from a two-year recession, and lower interest rates are expected to speed up the recovery by encouraging investments and consumption. Yields on interest rate futures were slightly down in morning trading as investors pared majority bets on a 75-basis-point rate cut at the bank’s next meeting on July 26.