Morning Market Update July 5th: Market Fireworks

July 5th, 2013 by

U.S. markets decided to have some fireworks of their own this morning, as they open after the July 4th holiday. Among the things shooting up into the sky and making watchers “ooh” and “aah” was the government jobs report, posting a giant 195,000 gain for June. Analysts had expected a much more moderate 165,000. To add more sparkle to the spectacle, the Labor Department revises May’s numbers up by 20,000 to make it a 195,000 print as well. They then went all the way back to April and revised THAT number up as well.

In response to the news, the dollar shot up like a bottle rocket, hitting a three-year high. This also drove the 10 year Treasury bond up 21 points to 2.71%. Even though oil is over $106 a barrel on fears Suez canal traffic could be affected by the coup in Egypt, commodities across the board took a pounding from the spiking bond yields and soaring dollar.

Stocks opened much higher on Wall St. over the employment numbers, even though they included drops inn government and manufacturing jobs, and an increase in the number of people working part-time jobs who would rather be working full-time. The unemployment rate stayed at 7.6% as more unemployed people who had given up finding a job re-enter the market, increasing the pool of job seekers.

In Europe, the ECB and the Bank of England both came out with forceful pledges to keep interest rates low for an extended time. This boosted European stocks and weakened the euro, which fell to 1.28 against the dollar.

In Asia, the Nikkei closed above 14,000, gaining 2.1%, as the yen weakened past 101 to the dollar. Hong Kong shares were up 1.9%, marking a second day of gains. Chinese shares closed essentially flat.

The spike in bond yields and the dollar shooting for the stars has pummeled commodities, including precious metals. Most commodities are priced in dollars, so a stronger dollar means that commodities are more expensive in domestic currencies across the world. At 10am Eastern Time, gold was down 3.4% to $1,210, and silver was down 5% to $18.73. Platinum and palladium were also down, by over 2%.

by David Peterson