Important developments today:
1. U.S. markets: stock futures and dollar decline, while Treasuries continue to rise
2. U.S. payroll gains for March disappoint markets
U.S. markets: stock futures and dollar decline, while Treasuries continue to rise. U.S. stock futures dropped sharply on Friday after a government report showed U.S. employers added fewer-than-expected jobs in March. The dollar weakened as well following this news while U.S. Treasuries extended their weekly gains as the weaker March payroll report revived speculation the Federal Reserve might provide another round of quantitative easing to sustain the economic recovery. S&P500 futures fell 1% in morning sessions following the benchmark index’s biggest weekly decline of the year yesterday (0.7%). The dollar lost 1.1% against yen this morning, touching the lowest level since March 8th, while the Dollar Index, which tracks the greenback relative to a basket of six major foreign currencies, weakened 0.3%. Meanwhile, the benchmark 10-year bond yield decreased 11 basis points (bps) to 2.07%.
U.S. payroll gains for March disappoint markets. The Department of Labor reported today that some 120,000 jobs were created during March, half the upwardly revised increase of February, and the fewest in 5 months. Markets were disappointed at the outturns, and harkened to the recent words of Fed Chairman Bernanke, who noted that the recent improvement in labor markets may not be sustained without a pickup in overall growth. Private payrolls increased 121,000—a weak showing in contrast with figures for the last months of 2011 and first of 2012.
Among Emerging Markets
In South Asia, Sri Lanka’s central bank raised its benchmark lending rate by 75 basis points to 9.75%, the second increase in two months, to check domestic credit growth and anchor inflationary expectations as the inflation rate doubled to 5.5% year-on-year (y/y) in March from 2.7% in February. Rapid credit growth has been underpinned by strong economic growth (robust 8.3% in 2011) and has contributed to surging import demand and a widening trade deficit, creating pressures on Sri Lanka’s external balance of payments position.
In Sub-Saharan Africa, Kenya’s central bank maintained a tight monetary stance, keeping its key policy interest rate at 18% due to the high rate of increase in core prices and private-sector credit, a large current-account deficit, and upward risks to food and energy prices from expected delays in the commencement of the long rains. Kenya’s consumer price inflation continued its decline over the past four months to 16.7% (y/y) in March.