• The dollar traded mixed on Friday after the US unemployment rate jumped to 10.2% in October and employment dropped a larger-than-expected 190K, raising doubts of the US recovery. The employment situation is indeed bad with unemployment at the highest level since 1983. The silver lining is that the previous two months’ payroll losses were revised lower and the payroll losses are slowing. More importantly, the employment situation is clearly a lagging indicator and should not be use to grade the recovery. However, the weak labor market suggests that the Federal Reserve is not anywhere near tightening its monetary stance, so the greenback is unlikely to get any yield support anytime soon. The S&P 500 rose 2.67 to 1,069.30. The yen rallied; Japan’s leading economic index rose for a seventh consecutive month. The euro was unable to stay above the 1.49 handle. European Central Bank council member Ewald Nowotny said the central bank hasn’t decided yet whether to discontinue its 12-month loans next year as indicated by ECB President Jean-Claude Trichet. The decision will depend on economic developments. Sterling gained for a fifth consecutive day as UK producer output and input prices rose. The Canadian dollar declined as Canada’s employment unexpectedly fell and unemployment rate rose increasing the risk of a Bank of Canada currency intervention to limit the loonie’s appreciation.
• The AUD/USD rose after the Reserve Bank of Australia raised its outlook for the Australian economy and signaled further interest-rate hikes. The RBA said “the cash rate remains at a low level, and a further gradual lessening of monetary stimulus is likely to be required over time if the economy evolves broadly as expected.” After making a high on October 21, the AUD/USD has consolidated gains and reduced its overbought condition. In a strong long-term uptrend, the pair has just broken its short-term downtrend and will likely test the recent high in the 0.93 area.

Financial and Economic News and Comments

US & Canada

• US nonfarm payrolls fell a more-than-expected 190,000 in October after falling a revised 219,000 in September, figures from the Labor Department showed. Revisions to August and September added 91,000 to payrolls, bringing the net loss in today’s report to 99,000. Payrolls continued to decline in most key sectors. The biggest payroll losses were in construction (-62,000), manufacturing (-61,000), and retail trade (- 40,000). The strongest payroll gains were in education/health (+45,000) and temps (+34,000). The unemployment rate soared more than expected to a 26-year high of 10.2% in October from 9.8% in September. Average hourly earnings grew a more-than-expected 0.3% m/m to $18.72 in October after a 0.1% m/m increase in September. Earnings rose 2.4% y/y. Average weekly hours held at 33.0.

• US wholesale inventories fell 0.9% m/m to $377.7 billion in September, a 13th consecutive fall, after a 1.3% m/m decrease to a slightly downwardly revised $381.1 billion in August, data from the Commerce Department showed, registering the longest stretch of declines since records began in 1987. Wholesale sales increased 0.7% m/m to $320.2 billion in September after an upwardly revised 1.1% m/m advance to 318.1 billion in August, indicating the US economy is steadily recovering. The inventory-to-sales ratio declined to 1.18 in September from 1.20 in August, compared to September 2008’s 1.18. Inventories fell 15.0% y/y in September; sales fell 15.2% y/y.
• US consumer credit fell for an eighth consecutive month in September, falling by $14.8 billion, or 7.2% at an annual rate, to $2.46 trillion, after declining by $9.86 billion in August, figures from the Federal Reserve showed, registering the longest stretch of declines since records started in 1943.
• Canada’s employment unexpectedly declined 43,200 in October after two months of moderate growth, pushing the unemployment rate to a higher-than-expected 8.6% from September’s 8.4%, according to figures from Statistics Canada. The October employment decline was led by a 59,700 drop in part-time employment, while full-time positions increased 16,500.

Europe

• UK PPI output was up 0.2% m/m in October, an eighth consecutive month-on-month gain, reflecting price increases in electrical products, transport equipment, alcohol and tobacco, and petroleum products, after a 0.5% m/m advance in September, according to data from the Office for National Statistics. October PPI output rose 1.7% y/y. Core PPI output increased 0.3% m/m in October and rose 2.0% y/y. PPI input grew 2.6% m/m in October, reflecting a price rise in crude oil, after a 0.5% m/m decline in September. October PPI input increased 0.1% y/y, following September’s revised 6.2% y/y decrease.
• Switzerland’s seasonally adjusted unemployment rate was unchanged at 4.1% in October, while the nonseasonally adjusted unemployment rate increased to 4.0% from September’s 3.9%, the State Secretariat for Economic Affairs said.
• UK GDP fell 0.4% in the three months through October after the same rate of decline in the three months through September, according to GDP estimates released by the National Institute of Economic and Social Research.
• Germany’s seasonally adjusted manufacturing orders increased a slightly less-than-expected 0.9% m/m in September, a seventh consecutive month-on-month gain, after an upwardly revised 2.1% m/m advance in August, led by a 3.7% m/m September increase in export orders, according to data from the Federal Ministry of Economics and Technology. September manufacturing orders fell a non-seasonally adjusted 13.1% y/y, following a revised 19.8% y/y August drop.

Asia-Pacific

• The Japanese leading economic indicators index, a measure of future economic activity, advanced to 86.4 in September, a seventh straight monthly gain, from 83.2 in August, according to preliminary September LEI data released by the Cabinet Office. The coincident index, measuring present economic activity, rose to 92.5, a sixth consecutive monthly rise, from 91.2, indicating Japan’s economic recovery is strengthening.
• The Australian Industry Group/Housing Industry Association performance of construction index increased to 50.9 in October from 50.8 in September, indicating Australia’s construction sector posted modest growth for a second consecutive month, led by further gains in activity, employment and supplier deliveries, according to an AiG/HIA report. The activity index advanced to 50.2 in October from 50.0 in September, showing continued mild activity growth for a second straight month. Employment expanded further in October, with the employment index increasing to 52.6, the second gain in employment since March 2008, from September’s 51.8. Demand for deliveries of inputs from suppliers grew further in October, with the supplier delivery index climbing to 55.1, the second increase in the past 14 months, from September’s 50.4. However, the new orders index declined to 48.0 from 51.0, suggesting the improvement in the construction sector remains “tentative and unevenly based,” according to the report.

FX Strategy Update

*Expert Market Commentaries, charts and information are provided by Hans Nilsson of Globicus International, Inc., a registered third party CTA, are intended for educational purposes only and do not constitute trading recommendations.

Past performance is not indicative of future results. Trading OTC Forex on margin carries a high level of risk, and may not be suitable for all investors. Please contact a registered trading advisor if you have any questions.

This report is intended solely for distribution to customers of Capital Market Services, L.L.C. Any information in this report is based on data obtained from sources considered to be reliable, but no representations or guarantees are made by Capital Market Services, L.L.C. with regard to the accuracy of the data. The opinions and estimates contained herein constitute our best judgment at this date and time, and are subject to change without notice. Capital Market Services, L.L.C. accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this report. No part of this report may be reproduced or distributed in any manner without the permission of Globicus International, Inc.

©2004-2009 Globicus International, Inc. and Capital Market Services, L.L.C.