Macro Roundup (Oct 8)

SHANGHAI, Oct 8 (SMM) – This is a roundup of global macroeconomic news last weekend and what is expected today.

Last weekend

The US dollar weakened in choppy trading on Friday after data for September showed that job gains in the US fell short of expectations.

China's central bank said on Sunday that it would cut the required amount of cash that most banks must hold as reserves, to lower financing costs and spur growth.

Reserve requirement ratios (RRRs), currently at 15.5% for large institutions and 13.5% for smaller banks, would be cut by 100 basis points effective October 15, the People's Bank of China (PBOC) said.

The central bank will inject  750 billion yuan ($109.2 billion) in cash into the banking system with the cut by releasing 1.2 trillion yuan in liquidity, with 450 billion yuan of that to offset maturing medium-term lending facility (MLF) loans.

US job creation for September fell to its lowest level in a year, even as unemployment dropped to a low in nearly 50 years, according to Labor Department figures released on Friday.

Nonfarm payrolls rose just 134,000, well below the estimated 185,000 and notched the worst performance since last September. Unemployment fell to 3.7%, the lowest since December 1969 and below expectations.

The survey period for September's count overlapped with Hurricane Florence's landfall on North and South Carolina.

August's initial count was revised up dramatically, from 201,000 to 270,000. Numbers in July also grew, from 147,000 to 165,000.

The US trade deficit increased to a six-month high in August as exports dropped further amid declining soybean shipments and imports hit a record high.

The Commerce Department said on Friday that the trade gap increased 6.4% to $53.2 billion, widening for a third straight month. Data for July was revised to show the trade deficit rising to $50 billion, instead of the previously reported $50.1 billion.

The trade deficit of politically sensitive goods with China surged 4.7% to a record high of $38.6 billion.

The Trump administration said that eliminating the trade deficit will put the economy on a sustainable path of faster growth, an argument that has been dismissed by many economists given constraints such as low productivity and slow population growth.

The count of total active rigs in the US fell to 1,052, industrial services firm Baker Hughes noted in its latest weekly survey.

Oil rigs declined to 861 while gas rigs remained unchanged at 189, with two rigs classified as miscellaneous.

China's foreign exchange reserves edged down 0.7%, or $22.7 billion from a month earlier, to $3.087 trillion by the end of September, the central bank said on Sunday.

Wang Chunying, spokesperson of the State Administration of Foreign Exchange, attributed the contraction to a number of factors including exchange rate conversion and changing asset prices.

Day ahead

Some data to monitor today include China’s Caixin purchasing managers’ index (PMI) in September, Germany’s industrial output in August and the eurozone’s Sentix investor confidence in October.

Market participants should also monitor US Secretary of State Mike Pompeo's visit to Beijing for consultations on international and bilateral issues. The visit is part of a larger Asia trip that began over the weekend when he met Japanese Prime Minister Shinzo Abe in Tokyo and North Korean leader Kim Jong Un in Pyongyang.