Jobs Report Disappoints, Or Did it?

* Only a handful of currencies rally today..
* Germany basks in weak euro for exports .
* China posts a strong Trade Surplus.
* Dollar Bloc currencies on rally tracks today! .

And now. Today’s A Pfennig For Your Thoughts.

Good day. And a Tom Terrific Tuesday to you! And welcome back from a 3-day Holiday weekend, the last one of the summer! Yes, although the actual summer count has a couple of more weeks to go, the unofficial end of summer was this weekend. So, goodbye summer, we hardly knew you, for it was filled with chilly rainy days to start with, and when things finally heated up here, it was time to shut it down. I know it wasn’t like that everywhere, but here in the St. Louis region, that’s what it was. But the summer brought us a very good baseball season so far, YAHOO!

Well, to start things off this morning. There was a late stock market rally in China overnight, and that has the Global markets breathing easier to start the week. China did lower their GDP forecast from 7.4% to 7.3%, but I guess that didn’t spook the stock market there, nor did the fact that China printed a very weak imports number, which signals slow domestic demand. The Trade Surplus in China was still good at $60.2 Billion, which beat the forecast of $48 Billion, but it’s difficult to get too excited when the extra Surplus was generated by weak imports. Export Growth continued to show that there’s weak Global Demand, but Export Growth did grow 5.5%… So it wasn’t a complete loss for exports.

But through all of that, the Chinese renminbi was weakened overnight, for the first time in over a week. No wait, I don’t know what happened Sunday night to Monday morning, so I can’t really say that! But I can say. for the first time that I’ve seen in over a week! HA! Thought you had me, didn’t you? Well, not so fast there Timmy! I’m smarter than the average bear!

In fact the currencies for the most part are down VS the dollar this morning, with a couple exceptions, one being the British pound sterling, which took the news that the British Retail Sales Monitor report was very week at -1% year on year. The pound was able to shrug off the data, due to some smarty pants people pointing out that in August there was a Bank Holiday, and it could have messed up the data. (but this smart alec would point out that if the data is year on year, then the same bank holiday was held in August last year too!) But, don’t let that get in the way of a good story, because the currency traders haven’t let it do so! The pound is the best performer overnight, and that’s that!

The Aussie dollar (A$) is also on the positive side of the ledger VS the U.S. dollar this morning, and is dragging the N.Z. dollar/ kiwi along. I think this looks like a “relief rally” more than anything else folks. Not that I’m against “relief rallies”, especially for these two S. Pacific gems that have most recently been beaten and battered by their association with China. Reminds me of when I was a young kid, and my mother used to tell me that you are who you associate with.Whether it’s true or not, it’s how people see you. And that sure does hold true for the Antipodean currencies of A$’s and kiwi. I don’t want to get too lathered up about this, because what I can tell, this is the second day of the “relief rally”, and usually these things don’t last too long, unless they can gather enough oomph to cross a trading line on a chart, and it wakes up the chartist traders.

Inside New Zealand, the Reserve Bank of New Zealand (RBNZ) meets this week (tonight for us, tomorrow for them). I’m wondering if the kiwi weakness that brought kiwi to a 6-year low last week is enough weakness for the RBNZ. The RBNZ is always whining about kiwi strength, and with kiwi at a 6-year low, one would have to wonder if the RBNZ whines about it now, whether the markets begin to think, they’ve gone too far. I don’t know, I’m just asking the question, so I guess we’ll see soon enough.

The Eurozone received some good news this morning, as the final print of 2nd QTR GDP was put to bed, after being revised upward from +0.3% to +0.4%, VS the previous quarter. The +0.3% was from the “flash estimates” that we talk about. However, the euro isn’t moving higher on the news, as the single unit is still reeling from being thrown under bus by European Central Bank (ECB) President, Draghi. Germany, the Eurozone’s largest economy, printed some very good Trade Surplus numbers this morning that basically point to the benefits of a weaker euro. But that begs the question of whether the euro is too weak? I would say yes, for in July, Germany printed a record $28 Billion Trade Surplus beating the previous month’s record in June of $26.75 Billion. And the hits just keep coming! Now, I’m not unhappy that Germany is printing such large numbers on a monthly basis, due to the weak euro, but I do worry, about the euro being too weak. And Germany getting used to all this glory, but then seeing it slip away when the euro begins to rise again.

And it’s not just against the dollar that the euro has lost ground this year. The euro has lost ground against almost all of Germany’s trade partners, like 5% VS the renminbi, and 6% VS the pound . And let’s not forget that 80% of all trade in the Eurozone is amongst the Eurozone countries, and in that regard, exports to those Eurozone countries grew at 4.8%, so, you see, it’s not just the weak euro that’s responsible.

Well, we’re now closer to the ultimate September meeting of the Fed. And Friday, in the Wall Street Journal (WSJ) Fed member Williams was interviewed, and basically he was non-committal about a rate hike, but instead chose to highlight his concerns of 1 Low inflation, 2. Dollar strength, and 3. China. That would lead one that was reading this article to think that maybe Chuck is right after all, that there will be no rate hike in 9 days. Besides that WSJ article, I dear reader sent me an article that highlighted former Fed members who in a survey voted that the Fed wouldn’t hike rates in September.

I’m still wondering when the currency traders are going to figure out that there’s not going to be a rate hike in September. I guess when the Fed promises 2 rate hikes in 2015, and we’re down to the basically the last 3 months of the year, I can understand the currency traders not giving up on the Fed’s promise. But promises can be broken, just like hearts. And when they do get broken, people get hurt. Just ask the people of Canada, and now the U.K., who’ve had the pleasure of listening to Mark Carney’s promises to hike rates for a few years now, first with the Bank of Canada, and now with the Bank of England, and a rate hike never materializes.

Well, isn’t this nice. I say that facetiously, folks. But an article on outlines the law that Russian President, Putin, signed into law on August 28, just a couple of weeks ago, that is aimed to help de-dollarize Russia. Putin asked his Parliament to ratify a treaty among members of the Commonwealth of Independent States that would expand the use of their national currencies instead of the dollar or euro, in terms of trade. I don’t know what he’s got against the euro, other than the Eurozone has been like a trained puppy dog to the U.S. and held sanctions VS Russia in place as their master has demanded.

I made it this far without talking about last Friday’s Jobs Jamboree. And I’m sure the dollar bugs would prefer that I left it just like that, for that’s what the rest of the markets pundits have done, choosing instead to head to the Hamptons or wherever, and fire up the Weber Kettles, instead of analyzing the only 173,000 jobs created in August, VS the 217,000 forecast. Well, I’ll start this bidding with my volley that 110,000 of the 173,000 jobs created were added by the BLS after the surveys. So, in keeping with my disdain for the BLS, I just say that on 62,000 jobs were created in August. But, and I can hear the dis-believers of the way I see things, how do you explain the Unemployment rate falling to 5.1% from 5.3%? It’s all done with smoke and mirrors, folks. It’s about people leaving the work force, and not just the 10,000 Baby Boomers that retire each and every day.

I’ve long told you that I’m not going to get all upset over the BLS report every month any longer, and so with that, I’ll switch to the things I believe to be more important, and that is the Avg. Hourly Earnings, which were 2.2% year on year, the Avg. Hours Worked which were steady at 34.5 per week, and the Labor Participation Rate, which remained steady at 62.6%… Nothing here tells me the economy is strong, that labor is strong, or that companies are ready to bust out at the seams with volume and business.

Today’s U.S. Data Cupboard has the July Consumer Credit (read debt) which is expected to be around $18 Billion, down from June’s $20.74 Billion, but you may recall that June’s number was much higher than expected when it printed, so let’s not get out a dancing clothes just yet until we see the color of the Consumer debt for July.

There’s not much else on the docket for the Data Cupboard this week, so the currencies will most likely be held hostage by the dollar, as the currency traders still believe in promises.

Gold is basically flat today, up a buck or two at times, and then back to flat, and then back up a buck or two, you get the picture. Gold had a bad week last week, for sure. But that doesn’t stop the physical demand for the shiny metal. Gold researcher extraordinaire, Koos Jansen, tells us that Gold exports from the U.K. to China reached a record 32.4 Tonnes in June. China to me, is like the trader in the trading pits, who comes in and says, “I’m buying and will take all sell orders”, and everyone goes crazy trying to get their sell orders into him. China has told the world, “I’m buying and will take all sell orders”.

Palladium is the best performing precious metal today with a gain of $12.85 at this time, but it has been higher. Oh no! Don’t tell me that. Nah, that can’t be, it’s too small of a market, it would be so obvious!

To recap. the dollar has the conn for the most part today, with the dollar-bloc currencies, and pound sterling all counter balancing the dollar strength. The Jobs Jamboree on Friday was disappointing, but that didn’t stop the markets from still believing that a rate hike is coming in 9 days. China lowered their growth forecast to 7.3% from 7.4%, but printed a very strong Trade Surplus, that was a direct result of imports falling on their face. The renminbi was marked down for the first time in week that Chuck has seen. Gold is basically flat today, but physical demand I still strong from China.

For What it’s Worth. This is going to be good, well, not “good” as in like chocolate chip cookie, but good as in an interesting read. You see, I’ve been highlighting as we go along, how the mortgage people out there are heading down the same paths they headed down before, when they got into so much trouble. Remember the Housing meltdown? Well, I do, because I called it in 2003! But any way, I found this on the Bloomberg, and can be read in its entirety here:

“Years after the great American housing bust, mortgages akin to the so-called liar loans — which were made without verifying people’s finances — are creeping back into the market. And, like last time, they’re spreading risks far and wide via Wall Street.

Today’s versions bear only passing resemblance to the ones that proliferated in the mid-2000s, and they’re by no means as widespread. Still, they reflect how the business is starting to join in the frenzy that’s been creating booms in everything from subprime car loans to junk-rated company bonds.

In a throwback to subprime times, Velocity and other specialty lenders routinely offer certain mortgages with limited reviews, if any, of borrowers’ finances. That’s because the rules exempt mortgages made for “business purposes.” The setup lets borrowers avoid typical paperwork, in return for paying higher mortgage rates.”

Chuck again. You know. I thought Federal Regulations outlawed “liar loans” , but who am I to question these practices, for if it helps the economy, then I’m all for it. go head lie, lie, lie! I’m being facetious folks. just for those of you who thought I had gone over the dark side.

Currencies today 9/8/15. American Style: A$ .6990, kiwi .6290, C$ .7565, euro 1.1160, sterling 1.5405, Swiss $1.0225, . European Style: rand 13.8105, krone 8.2655, SEK 8.4390, forint 281.40, zloty 3.7875, koruna 24.2290, RUB 68.13, yen 120.00, sing 1.4200, HKD 7.7505, INR 66.54, China 6.3639, pesos 16.85, BRL 3.3935, Dollar Index 96.07, Oil $45.15, 10-year 2.16%, Silver $14.74, Platinum $1,000.90, Palladium $593.82, and Gold. $1,122.59

That’s it for today. Well, the Annual Butler Labor Day BBQ was a blast, it was a hot sunny day, and everyone had a grand time (I think)! The rest of the weekend was pretty subdued compared to Saturday! I got to go to the day game yesterday with oldest son, Andrew, great seats, great parking, a really bad game. UGH! My beloved Missouri Tigers won their opener on Saturday, but that game was pretty, lots of work to be done, but that’s why they play weaker teams to open up! Well, this is it for this week for me. One and done! I head to MD Anderson in Houston tomorrow morning, and Frank, Chris and Mike will have the conn on the Pfennig the rest of the week. I’m really looking forward to the meeting with my oncologist there, but not all the tests and scans that have to be completed before I meet with him. UGH! The waiting and the Barium is the so disgusting, but. It is what it is. and in three days, it will be over. With hopefully a new plan of attack! And on that note. I’ll get out of your hair for today, and hope you have a Tom Terrific Tuesday!

Chuck Butler
Managing Director
EverBank Global Markets
Editor of A Pfennig For Your Thoughts