Currencies

Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

Continue Reading

Property

Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

Continue Reading

Currencies

Euro suffers worst month against the pound since financial crisis

Political risks are still all the rage in the currency markets. The euro has suffered its worst slump against the pound since 2009 in November, as investors hone in on a series of looming battles between eurosceptic populists and establishment parties at the ballot box. The single currency has shed 4.5 per cent against sterling […]

Continue Reading

Banks

RBS falls 2% after failing BoE stress test

Royal Bank of Scotland shares have slipped 2 per cent in early trading this morning, after the state-controlled lender emerged as the biggest loser in the Bank of England’s latest round of annual stress tests. The lender has now given regulators a plan to bulk up its capital levels by cutting costs and selling assets, […]

Continue Reading

Currencies

China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

Continue Reading

Categorized | Currencies

US wage growth slowest since 1982


Posted on July 31, 2015

397612 04: Rows of the new Series 2001 one dollar bill notes are stacked November 21, 2001 at the Bureau of Engraving and Printing in Washington, DC. The new dollar bills contain the signatures of U.S. Treasury Secretary Paul O''Neill and U.S. Treasurer Rosario Marin. (Photo by Alex Wong/Getty Images)©Getty

Expectations of a Federal Reserve rate rise in September took a knock on Friday when data showed quarterly US wage growth at its lowest level for more than three decades.

Wages and salaries for US workers rose by the smallest amount for a quarter since 1982, potentially clouding hopes of policymakers that the recovery is set to shift into a higher gear.

    The numbers from the Department of Labor, which showed a 0.2 per cent rise in employment costs versus the 0.6 per cent expected by Wall Street, comes as the debate about income inequality intensifies ahead of the presidential election next year.

    The figures sent the dollar and US government bond yields down sharply and put a dampener on expectations for a Federal Reserve rate rise following the Federal Open Market Committee’s carefully crafted statement on Wednesday.

    Instead of raising rates only when it had seen “further improvement” in jobs, the FOMC said on Wednesday it would do so when it had seen “some further improvement”.

    Joshua Shapiro, chief US economist with MFR, characterised the data as “not lift-off friendly”.

    “The dovish wing of the FOMC will look at this as another reason to be ultra cautious with the timing of lift-off,” he said. “It raises the bar in what kind of growth numbers that need to be seen between now and mid-September for the Fed to pull the trigger.”

    US presidential candidates across the political spectrum have pointed to income inequality and middle-class wages as one of the most pressing issues of the forthcoming election.

    Wage growth is also a key factor weighing on when the Federal Reserve will raise rates. While an acceleration in the rate of pay rises would suggest an earlier rise, a slowdown may push a rise back, although Fed chair Janet Yellen has signalled there will be a rise at some point this year.

    The unexpected slowdown in wage growth comes despite signs the labour market began tightening earlier this year and high-profile wage increases from large employers such as Walmart, Target and McDonald’s.

    Treasuries rallied on Friday morning in response to the labour market data, with buying focused on the shorter-dated portion of the yield curve, with the yield on the 3-year note sliding back below 1 per cent.

    The yield on the 10-year Treasury, which moves inversely to its price, fell 5 basis points to 2.21 per cent, while that on the five-year note dropped 7 basis points to 1.55 per cent.

    The dollar also took a hit, falling 0.27 per cent against the yen at Y123.79, having been on a high note immediately before the numbers came out.

    Eric Green, a strategist with TD Securities, said the data would not be constructive for the Fed as it debates lifting interest rates for the first time in nearly a decade.

    However, despite the “dismal” figures, he added the odds of a rate rise in September were still above 50 per cent.

    “Labour market fundamentals are improving, job openings at record highs, and slack on a steady downtrend. This is precisely how the Fed will interpret this report, even if the numbers here are atrocious,” he said in a note.

    The figure, the smallest gain since the labour department began publishing the series in the 1980s, followed a 0.7 per cent advance in the first quarter of 2015.

    Gross domestic product climbed 2.3 per cent in the three months to June, according to figures released on Thursday, slightly below predictions for 2.5 per cent growth.