After the release of the U.S. labor market data, which was weaker than expected, theAmerican stock indices fell last Friday. Dow Jones Industrial Average fell by 0.15%, Nasdaq Composite fell by 0.3%, and S&P500 – by 0.3%.
The index Stoxx Europe fell by 600 points last Friday or by 0.9%. London index FTSE 100 has grown by 0.6%. This is the only European index remaining in the positive territory.
In general, US labor market data for September was not too bad. Non-Farm PayRolls has grown by 156 000 in September against the forecast of +175000 and the revised figure of 167000 in August.
Unemployment rate has grown by 0.1% against the forecast of 4.9% and the level of 4.9% in August. Average hourly wages has increased by 2.6% on annual basis and by 0.2% in September.
U.S. economy shows the signs of steady recovery, which increases the likelihood of the interest rate before the end of this year. According to the latest data from CME Group, after the release of the U.S. labor market data last Friday, probability of the rate hike in November fell from 14.5% to 8.3%, and has increased from 63.4% to 65.1% in December
It is likely that investors will continue to support the USD till end of the year.
It is worth noting two aspects in regards to the USD and the US monetary market.
Vice-Chairman of the fed Stanley Fischer said on Sunday that he expected only gradual increase in the interest rate. He also said that the labor market is recovering at a slower pace than before and inflation rate is slowly moving to the target level of 2% set by the US Fed.
Mrs Stanley Fischer also said that as the redundant labor resources are utilized slower now than in the past few years and there are challenges of improvement in the labor market, while inflation rate remains below the target set by the US Fed at level of 2%, it was decided to wait for further advance toward the target.
On the other hand, increasing probability that Donald can win in presidential election creates increasing caution in the U.S. stock market.
Difference in the approach of the candidates for U.S. President to the economic policy makes the election important to the financial markets. During his election campaign Donald Trump promised tax cuts for the companies, which could support economic growth in the country and trigger the rise in the USD. Mrs Clinton is going to adhere to soft monetary policy, which will have a positive impact on the American stock market. It seems that Donald Trump is getting more successful that Hillary Clinton now. He even promised to put Clinton in jail in case of his victory in the election for the leak in her electronic correspondence.
Today’s economic calendar is uneventful as it is a day off in the US, Canada, Japan. Market volatility is expected to be weak.