Aurelia Butler

OTTAWA (Reuters) -Canada’s economy unexpectedly shed a net 2,800 jobs in July, as gains in full-time work were offset by part-time job losses, while the unemployment rate remained at a 30-month high of 6.4%, data showed on Friday.Analysts polled by Reuters had forecast a net gain of 22,500 jobs and the unemployment rate to rise to 6.5% from 6.4% in June. An increase in unemployment was largely expected due to rapid population growth which the labor market has not able to absorb.The average hourly wage growth of permanent employees slowed to an annual rate of 5.2% from 5.6% in June, Statistics Canada data showed. The pay growth rate is closely tracked by the Bank of Canada (BoC) because of its effect on inflation.July was the second consecutive month of job losses and added to signs of easing in Canada’s labor market, which would support the case for the central bank to lower interest rates again at its next announcement in September. The unemployment rate, highest since 6.5% in January 2022, has been on an upward trend and has risen 0.7% percentage points since January.The participation rate of Canada’s labor force also declined to a 26-year low of 65% in July, largely reflecting a cohort of people not looking for jobs. The Canadian dollar extended loses slightly and weakened 0.12% to 1.3744 against the U.S. dollar, or 72.76 U.S. cents. Yields on the Canadian government’s two-year bonds dropped by 2.5 basis points to 3.451%.Friday’s data follows a dismal jobs report last week from the United States, which ignited worries about Canada’s biggest trading partner slipping into a recession.Citing progress towards achieving its 2% inflation target, the bank has lowered its key overnight rate twice in as many months and indicated it was now increasingly concerned about the chances of weaker-than-expected growth.Ahead of its last rate cut announcement on July 24, the bank noted that economic growth had been slower than population growth, leading to an excess supply in the economy and slack in the labor market. Money markets have priced in another 25 basis point cut at the bank’s next rate announcement on Sept. 4, and some even see a slim chance of a 50 basis point cut.The job losses in July were entirely in part-time work, which shed 64,400 positions and more-than offset a gain of 61,600 full-time jobs – the highest since February.Employment in goods-producing sectors increased by a net 12,000 jobs, led by construction and utilities, while the services sector lost a net 14,800 jobs, mostly in wholesale and retail trade and in some finance-related jobs. More

LONDON (Reuters) -Global shares extended gains on Friday to erase nearly all of their losses from a big sell-off earlier in the week, with investors betting on the U.S. economy avoiding a hard landing as Fed policymakers signalled rate cuts as soon as September.Wall Street stock index futures were about 0.3% firmer, with no major U.S. data expected on Friday as nerves calmed following a volatile week that saw a mass unwinding of currency carry trades in response to the Bank of Japan’s surprise rate hike late last month.Reassurance from Federal Reserve policymakers that they were more confident that inflation is cooling enough to cut rates, along with a bigger-than-expected fall in U.S. jobless claims data on Thursday, underpinned the recovery in stocks.Oil prices headed for weekly gains of around 3% as fears of a widening Middle East conflict persisted, while the dollar hovered close to a one-week high.The MSCI All Country stock index, was up 0.3% at 784.4 points, recovering much of the ground lost during the week. The benchmark is 5.7% below its lifetime high of 832.35 reached on July 12, though still up 7.5% for the year.In Europe, the STOXX index of 600 companies was up 0.6%, with the loss for the week all but erased.In a sign of calmer nerves, the VIX index, also known as Wall Street’s ‘fear gauge’, tumbled nearly 2%, a far cry from its record one-day spike on Monday.Divergent central bank interest rate moves, a repricing of recession probability in the United States, thinner liquidity in August accentuating volatility, and Middle East tensions all combined to put the brakes on a months-long winning streak in stocks to record-highs, analysts said.”We are still in the month of August, so we can still have some volatility,” said Marie de Leyssac, portfolio manager at Edmond de Rothschild Asset Management.Investors will continue to study employment data, keep an eye on the Bank of Japan, and particularly on the annual meeting of global central bankers hosted by the Kansas City Fed in Jackson Hole later this month, she said.”This year I think it is a really important meeting because we will have more insight into what (Federal Reserve Chair) Jerome Powell sees for the future, and maybe more insight on the path to lower rates,” de Leyssac said.Before then, investors will scrutinise next week’s U.S. consumer prices and retail sales figures for fresh evidence on chances of the economy escaping a hard landing.NIKKEI RECOVERSJapan’s Nikkei stocks benchmark closed 0.6% higher, erasing most of the losses since a 12.4% crash on Monday.The Nikkei has managed to claw back most of its losses after a brutal sell-off on Monday due to recession worries and the unwinding of investments funded by a soft yen, finishing the week with a comparatively tame 2.5% decline.The yen also veered from negative to positive through the session, last trading at 147.060 per dollar.MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 1.65%, more than reversing the drop from Thursday. For the week, it has reversed earlier losses to be largely flat. “The prospect of better-than-feared U.S. growth and a weaker yen constrain the fundamental and technical risks that inspired the extreme volatility experienced at the start of the week,” said Kyle Rodda, a senior financial market analyst at Capital.com. Some Federal Reserve officials said they were increasingly confident that inflation is cooling enough to allow interest-rate cuts ahead, but not because of the recent market rout.The U.S. dollar gained as markets gave up bets on an emergency rate cut from the Fed, and is set for a 0.4% gain on yen this week, despite Monday’s precipitous 1.5% plunge. [FRX/]Bond yields have climbed this week with safe-havens in less demand, but began easing as confidence returned to markets. U.S. 10-year yields were at 3.957%. Two-year yields were trading at 4.0385%.Brent crude futures were trading up 0.4% at $79.47 a barrel, and up more than 3% for the week, while U.S. West Texas Intermediate crude advanced 0.4% to $76.50, and also up over 3% for the week. Gold prices were a touch firmer at $2,427 an ounce, and heading for a drop on the week. More

China’s Consumer Price Index (CPI) and Producer Price Index (PPI) for July showed slight improvements over forecasts. CPI rose 0.5% YoY, surpassing expectations (Citi/Mkt: 0.4/0.3% YoY) and reaching the highest level since April 2023, excluding Chinese New Year months. “The headline number could seemingly offer some relief for China’s soft domestic demand, yet the breakdown appears less encouraging,” the analysts said.Sequentially, CPI increased 0.5% MoM, reflecting a high reading if CNY months are excluded. Despite this, the breakdown reveals less favorable trends:The Producer Price Index (PPI) also beat expectations, remaining at -0.8% YoY (Citi/Mkt: -1.1/-0.9% YoY) with a sequential change of -0.2% MoM. However, the small beat might be short-lived due to expected commodity price softening into August. Key sectoral performances include:Despite the small beats in inflation data, Citi Research argues that these figures may not adequately address persistent deflationary pressures. Supply-side factors, such as food price fluctuations and seasonal travel demand, have driven recent CPI improvements, but core inflation remains weak and PPI faces ongoing challenges from overcapacity and insufficient demand.Citi maintains its annual inflation forecasts at 0.6% YoY for CPI and -1.4% YoY for PPI, with a negative GDP deflator expected for the year.  More

Net profits at commercial banks grew 0.4% year on year to 1.3 trillion yuan ($181.3 billion) in the first quarter of this year and their capital adequacy ratio at the end of June was 15.53%, the regulator added.($1 = 7.1699 Chinese yuan renminbi) More

The Wall Street bank has previously maintained that the Federal Reserve would likely halt balance sheet reduction before reserves reach the “somewhat above” ample level, particularly in the event of a recession.Last year, during the July 2023 press conference, Fed Chair Powell mentioned that in “a world where things are okay” and the Fed is merely normalizing rates lower, balance sheet reduction could continue even as policy rates decrease.However, this narrative could change “if there is a material weakening in the labor market and activity,” Citi economists note.With the latest jobs report revealing more labor market weakness than anticipated by most economists and the Fed, it has become more probable that the policymakers might signal at the September meeting that the end of balance sheet reduction is nearing, potentially by December.“If activity and labor market data deteriorate further in coming weeks, a sooner end of the balance sheet could be signaled at the September meeting but an abrupt end in September would not be our base case unless acute liquidity issues arise,” economists continued.”We do not expect any major liquidity pressures in the coming months with reserves still at abundant levels, reverse repo balances still ~ $290bln and the standing repo facility serving as a backstop.”In the week ending July 31, the Fed’s balance sheet saw a reduction of approximately $27 billion, with $10 billion in Treasuries and $14 billion in mortgage-backed securities rolling off.On the liability side, the Treasury’s cash account (TGA) surged to $854 billion on July 31 due to month-end settlements but has since fallen to $759 billion. The Treasury has indicated that the TGA will reach around $850 billion by the end of September, decreasing to $700 billion by year-end as the debt limit suspension ends.Reverse repo (RRP) balances have remained more persistent than expected, despite rising SOFR rates, likely due to intermediation and counterparty limit issues. Because of this and strong TGA liquidity, bank reserves fell to $3.178 trillion from $3.276 trillion during the same week. More