Non-farm payrolls in the U.S. came in much lower than anticipated, though some of the weakness is blamed on the winter storms in January. The Bureau of Labor Statistics reports that the economy added 113,000 jobs, against expectations of 185,000. Most of the gains were seen in construction and manufacturing, with federal, state and local governments eliminating 29,000 jobs. The unemployment rate dropped from 6.7% to 6.6%, barely above the Fed's targeted rate.
The immediate reaction was for gold and PGMs to spike higher, the dollar plunge, and stocks to dip. However, all these spikes were instantly reversed, as traders read what they wanted into the numbers. Silver was mostly unaffected by the news, marching to its own drummer today.
Speaking of silver, the U.S. Mint just released a report showing that demand for its silver bullion coins has QUADRUPLED since 2007. The report goes on to say that shortages an rationing in recent years has nothing to do with the above-ground silver supply, which is plentiful, but rather, surges in Silver Eagle demand has caused the Mint to temporarily run out of coin blanks. Since refineries and silver coin blank manufacturers are constantly taking new orders for silver rounds and bars, the Mint has to wait in the queue for additional new blanks above what has already been ordered.
Speculation is rampant in the markets, as traders debate whether the payroll report means that the Fed will keep stimulus at the current level, or even roll back the taper. Stocks are higher, while the dollar is slightly weaker. On the other hand, the unemployment rate is knocking on the door of the much-ballyhooed 6.5% level, where the Fed said that QE would be reduced.
While walking back that statement in recent weeks, and saying that benchmark interest rates would stay where they were even after unemployment dropped to this target, bonds gave up early morning gains after the latest numbers were released. The 6.5% "line in the sand" means that the Fed will lose a lot of credibility if it were to suspend or roll back the taper.
In global market news, China is back from the Lunar New Year holiday, and the Shanghai exchange notched a 0.66% gain. The Nikkei made the second 2%+ gain in three days, while the Hang Seng had the best day in a dismal month, due to short-covering.
Euro stocks popped on strong earnings reports, but the rally was suspended upon the payroll news out of the U.S., which caused indices to pare gains. Wall St. opened higher, but is trending towards unchanged in late morning trading.
Data shows that $24 billion has exited equities in the U.S. just in the last week, with $13 billion of that flowing into bond funds. Of the rest, some is in cash, and some went into precious metals. $6.4 billion was withdrawn from emerging market economies this week. This is down substantially from the panicked flight of capital in recent weeks, but still shows that investors and speculator are continuing a reduction in their exposure in these troubled economies.
For all the worry about Wall St. riding high on Fed money printing, it seems that the emerging markets in Asia and Latin America were the biggest addicts of American expansionist money policy. Now that the drug of easy money is being reduced, they are going through the shakes.