Daily Morning Report 07.05.2015

The Australian dollar held weaker on Thursday after jobs data came in weaker than expected, but revised upward the previous month’s figures painting a mixed picture on hiring trends. AUD/USD traded at 0.7958, down 0.13%, while USD/JPY changed hands at 119.45, flat, as markets in Japan re-open today after the three-day Golden Week holidays. Australia lost 2,900 jobs in April, well below the 5,000 gain expected, but March was revised up from 37,700 gained to 48,200. The unemployment rate ticked up to 6.2% from 6.1% on a steady participation rate of 64.8% as expected. Earlier, the AIG Construction index fell 3.1 points in April to 47, back into contraction on a fall in new orders in the commercial- and apartment-building sectors and a continued decline in incoming engineering-construction work. “The distinct fall in sector wide new orders is a clear warning that activity is unlikely to rebound anytime soon with only the house building sub-sector avoiding contraction,” said AI Group head of policy Peter Burn. “The Reserve Bank’s further trimming of interest rates this week may stimulate activity somewhat but it is difficult to see why this additional reduction will be effective in lifting overall activity unless supported by a degree of budget stimulus next week.” The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.12% to 94.31. Overnight, the dollar dropped to three-month lows against a basket of other major currencies on Wednesday, as downbeat U.S. economic reports added to uncertainty over the strength of the recovery. But Fed chair Janet Yellen also warned of the potential dangers from high stock valuations in an appearance with International Monetary Fund head Christine Lagarde at the Institute for New Economic Thinking in Washington. Responding to a question from Lagarde at the institute’s Finance and Society Conference, Yellen indicated that while the Fed is somewhat concerned about financial stability in the equity markets, it is not worried about potential bubbles forming. “I would highlight that equity market valuations at this point generally are quite high,” Yellen said. “There are potential dangers there.” Earlier on Wednesday, in a report, payroll processing firm ADP said non-farm private employment rose by 169,000 last month, below expectations for an increase of 200,000. The economy created 175,000 jobs in March, whose figure was downwardly revised from a previously reported increase of 189,000. A separate report showed that U.S. non-farm business sector labor productivity decreased by 1.9% in the first three months of the year, worse than expectations for a decline of 1.8%. The preceding quarter’s figure was revised to a drop of 2.1% from a previously reported fall of 2.2%. The report also said unit labor costs increased by 5.0% in the first quarter, above forecasts for a gain of 4.3% and following rise of 4.2% in the fourth quarter.