Friday Morning Cheat Sheet: 3 Stories Moving Markets



It’s Friday, November 8, and the U.S. Employment Situation report is making the rounds. We’ll get to it in a moment. First, to Europe.

1. French debt downgraded

For the second time in as many years, Standard & Poor’s has once again downgraded France’s credit rating. Citing slow (or negative) economic growth and risks facing government finances, the agency downgraded France’s debt from AA+ to AA (stable outlook), the third-highest tier of debt quality.

“We believe the French government’s reforms to taxation, as well as to product, services and labour markets, will not substantially raise France’s medium-term growth prospects and that ongoing high unemployment is weakening support for further significant fiscal and structural policy measures,” wrote Standard & Poor’s. ”Moreover, we see France’s fiscal flexibility as constrained by successive governments’ moves to increase already-high tax levels, and what we see as the government’s inability to significantly reduce total government spending.”

European equity markets declined in midday trading on Friday. In the U.K., the FTSE 100 was off 0.45 percent; in Germany, the DAX was off 0.63 percent; in France, the CAC 40 was off 1.24 percent; and the Euronext 100 index was off 1.28 percent.



2. United States labor market

Total nonfarm payroll employment increased by 204,000 in October, according to the most recent Employment Situation report, which was released by the Bureau of Labor Statistics on Friday. This was significantly greater than the 120,000 payroll increase expected by economists, and the headline unemployment rate actually increased from 7.2 percent to 7.3 percent on the month. September’s payroll growth was revised up, from 148,000 to 163,000. Total private payrolls increased by 212,000.

Average hourly earnings increased 0.1 percent, coming in below expectations for 0.2 percent growth. The average workweek shrank from 34.5 hours to 34.4 hours.

At 11.3 million, the total number of unemployed people was effectively unchanged. The civilian labor force continued to shrink, falling by 720,000, or 0.4 percentage points, to 62.8 percent. The BLS employment-to-population ratio declined by 0.3 percentage points to 58.3 percent. The number of long-term unemployed was relatively unchanged, at 4.1 million, or 36.1 percent of the total unemployed.

U.S. equities remained in the red in early trading. At 8:30 a.m., Dow futures were off 0.43 percent, S&P 500 futures were off 0.48 percent, and Nasdaq futures were off 0.25 percent.



3. International trade

China’s merchandize balance (the difference between the value of exports and imports, or the trade balance) nearly doubled between September and October, climbing from $15.2 billion to $31.1 billion. Exports, which slumped 0.3 percent on the year in September, rebounded in October, climbing 5.6 percent, much higher than the 2.8 percent export growth expected by economists. Imports increased 7.6 percent on the year, which was consistent with economist expectations. Overall, economists were expecting a traded balance of $22.1 billion. The total surplus of $31.1 billion is down by about 3 percent on the year.

At a glance, the data suggest two things. First, strong exports are a tailwind of the Chinese economy. Second, strong foreign demand for goods suggests that some of China’s trading partners are recovering. Recent data show that exports from Taiwan and South Korea have also been strong, suggesting a somewhat broader revival of Asia’s export economy.

Chinese leaders are scheduled to meet Saturday for an annual congress and discuss economic reforms. Some are expecting the leaders to pursue more free-market revisions to the business mechanism in the country, while others are forecasting state-led intervention in the markets designed to stave off a possible credit event in the coming years.

Major Asian equity markets closed Friday down for the day. In Japan, the Nikkei fell 1 percent to 14,086.80, and the yen was flat at 98.155 against the dollar. In Hong Kong, the Hang Seng fell 0.6 percent to 22,744.39, and in Shanghai, the SE Composite fell 1.09 percent to 2,106.13. In Australia, the ASX All Ordinaries fell 0.39 percent to 5,394.40.

Don’t Miss: 10 Cities with the Cheapest Home Prices in the U.S.