US Dollar Deposed as Payrolls Miss Dims Outlook for 2015 Rate Rise

New York (Oct 4)  As investors mulled Friday’s disappointing U.S. payrolls data one thing is clear, the dollar is losing out as prospects of the Federal Reserve pulling the trigger on higher interest rates this year diminish.

The greenback extended its drop against its Australian and New Zealand counterparts Monday and maintained losses against the euro, with traders pushing out bets on the first U.S. rate hike since 2006 to March next year. Sentiment was more mixed in equity markets, with most Asian index futures signaling gains while contracts on U.S. stocks retreated. Copper futures jumped as gold held onto its Friday surge, while oil was subdued after Saudi Arabia reduced its crude pricing to the U.S. and Asia.

Global stocks ended last week higher as the below-estimate jobs data put off the threat of an imminent U.S. rate rise, which along with the slowdown in China had been a source of turmoil last quarter. On Friday, the Standard & Poor’s 500 Index staged its biggest intraday rebound from a loss of more than 1.5 percent since October 2011 on prospects the record-low borrowing costs that fueled the recent bull market will remain in place for a while longer. Other central banks will be in focus this week, with Australia’s and Japan’s reviewing policy and minutes of the last European Central Bank meeting due.

“The Fed is extremely unlikely to begin policy normalization as soon as this month and December is looking tenuous too,” Philip Borkin, a senior economist in Auckland at ANZ Bank New Zealand Ltd., said in a client note. “At a time when the factors that appeared to stop the Fed from tightening last month are still lingering - fragile global backdrop and low inflation - the Fed would certainly risk creating some confusion and market volatility if it was to forge ahead with tightening at this stage.”

S&P 500 Index futures dropped 0.2 percent to 1,939.30 by 8:03 a.m. Tokyo time, after the gauge reversed a drop of as much as 1.6 percent to end Friday up 1.4 percent. The U.S. benchmark has risen over the past four sessions, with equities trying to solidify a rally following the worst quarterly slump in four years.

Yen-denominated contracts on Japan’s Nikkei 225 Stock Average added 0.1 percent in Chicago to 17,890, after ending the Friday session up 1.4 percent. Futures traded in Osaka were bid up 1 percent to 17,850 in the Osaka pre-market, after falling 0.1 percent by 3 a.m. Saturday.

The S&P/ASX 200 Index in Australia, where there is no settlement Monday due to a holiday in Sydney, looked set to track Friday’s recovery in the U.S. with index futures up 1.4 percent in most recent trading. Contracts on South Korea’s Kospi index rose 0.7 percent and the S&P/NZX 50 Index in Wellington, the first major stock measure to start trading each day in the Asian region, rose 0.7 percent.

Futures on Hong Kong’s Hang Seng Index dropped 0.2 percent Friday before the late-in-the-session rally in U.S. shares. Contracts on the Hang Seng China Enterprises Index, which tracks Chinese equities listed in the city, were down 0.1 percent. Markets in mainland China remain closed through Wednesday for the National Day holiday.

Data on the services industries in Japan and Singapore is due Monday along with an update on currency reserves from Korea. Australia reports on job advertisements.

MSCI’s All-Country World Index ended Friday up 1.2 percent in a third day of gains, capping a three-day rally of more than 3.6 percent. The index had slumped 9.9 percent in the third quarter, the most since the same period of 2011, as almost $10 trillion was wiped off the value of equities worldwide.

Currencies

The kiwi rose 0.2 percent to 64.42 U.S. cents, after climbing 0.5 percent on Friday, while the Aussie was up 0.1 percent to 70.52 U.S. cents following three days of gains.

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, slipped 0.1 percent Monday after dropping 0.3 percent last session. The index retreated 0.4 percent last week, extending losses after the U.S. jobs data.

Employers in the U.S. added 142,000 workers to nonfarm payrolls in September, the government said Friday, well below the 201,000 increase projected by economists in a Bloomberg survey. The jobless rate held at 5.1 percent, a seven-year low, as wages stagnated and people left the labor force.

The data saw bets on a rate hike at the Fed’s Oct. 27-28 meeting plummet to 10 percent, from 18 percent a week earlier and 41.5 percent a month ago, according to trading in Fed funds futures collated by Bloomberg.

è While stocks have been staging a comeback the dollar is depressed
square before the information While stocks have been staging a comeback the dollar is depressed

The euro was little changed at $1.1214 after rising 0.2 percent on Friday to cap a gain in the week of 0.2 percent. The common currency was steady at 134.36 yen.

Portugal’s ruling coalition didn’t win a majority in parliamentary elections, Prime Minister Pedro Passos Coelho said in comments broadcast on the RTP TV station. The vote was Portugal’s first since it exited an international bailout program last year.

Commodities

Copper futures due in December climbed 0.6 percent to $2.3395 a pound on the Comex, extending Friday’s 0.9 percent advance. The Bloomberg Commodity Index jumped 0.9 percent last session as the prospect of a weaker dollar for longer buoyed the outlook for raw materials prices.

Gold for immediate delivery was little changed at $1,137 an ounce after climbing 2.2 percent on Friday, the most since January. The prospect of a delay in U.S. monetary tightening burnished gold’s appeal as rising rates tend to see investors favor assets with better yield prospects.

West Texas Intermediate crude slipped 0.7 percent to $45.23 a barrel after rising 1.8 percent on Friday, while Brent dropped 0.5 percent to $47.88.

Saudi Arabian Oil Co. reduced its official selling price for medium-grade crude to Asia next month to a discount of $3.20 a barrel below the regional benchmark, compared with a $1.30 discount for October sales, the company said Sunday. The discount for the medium grade to Asia, the main market for Saudi crude, widened by the most since the state-owned company made a $2 a barrel cut in February 2012, according to data compiled by Bloomberg.

Source: Bloomberg