US Jobless Claims, Business Activity Keep Economy on Gradual Cooling Path

The sign on a Taco Bell reustaurant advertises "Now Hiring Managers" in Fitchburg, Massachusetts, US, June 12, 2018. REUTERS/Brian Snyder/File Photo Purchase Licensing Rights
The sign on a Taco Bell reustaurant advertises "Now Hiring Managers" in Fitchburg, Massachusetts, US, June 12, 2018. REUTERS/Brian Snyder/File Photo Purchase Licensing Rights
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US Jobless Claims, Business Activity Keep Economy on Gradual Cooling Path

The sign on a Taco Bell reustaurant advertises "Now Hiring Managers" in Fitchburg, Massachusetts, US, June 12, 2018. REUTERS/Brian Snyder/File Photo Purchase Licensing Rights
The sign on a Taco Bell reustaurant advertises "Now Hiring Managers" in Fitchburg, Massachusetts, US, June 12, 2018. REUTERS/Brian Snyder/File Photo Purchase Licensing Rights

The number of Americans filing new applications for unemployment benefits ticked up in the latest week, but appeared to be steadying near a level consistent with a gradual cooling of the labor market that should set the stage for the Federal Reserve to kick off interest rate cuts next month.
A slowdown in overall US business activity this month as firms faced diminished ability to push through price increases added to the evidence that the economy is slowing and inflation is downshifting to a degree that should allow Fed officials to focus more attention on the job market, Reuters reported.

With a rate cut now broadly expected next month, interest rates on home loans have already begun dropping, and that helped fuel a larger-than-expected rebound in existing home sales last month.
Initial claims for state unemployment benefits rose 4,000 to a seasonally adjusted 232,000 for the week ended Aug. 17, the Labor Department said on Thursday. Economists polled by Reuters had forecast 230,000 claims for the latest week.

The latest data should continue to allay fears that the labor market is rapidly deteriorating, first raised after a sharper-than-expected slowdown in job growth in July, which also saw the unemployment rate rise to a post-pandemic high of 4.3%.
Indeed, the latest claims data covers the survey week for this month's employment report from the Labor Department, and the leveling off in new filings points to "a small decline in the unemployment rate in August," Nancy Vanden Houten, lead US economist at Oxford Economics, said in a client note.

"Claims are leveling off on a trend basis, consistent with our view that, while the labor market is softening, it isn't weak enough to warrant anything more than a 25 (basis point) rate cut at the Fed's September meeting," she said.
Fed officials have said they are keenly watching the labor market, aware that waiting too long to cut interest rates could cause serious harm.
Layoffs remain historically low, however, with much of the slowdown in the labor market coming from firms scaling back hiring, trailing an immigration-induced surge in labor supply.

The Fed's 525 basis points worth of rate hikes in 2022 and 2023 are curbing demand.
The US central bank has kept its benchmark overnight interest rate in the current 5.25%-5.50% range for more than a year. With a first rate cut now widely expected at its Sept. 17-18 policy meeting, the market focus is on how large a reduction it will be - a quarter or a half percentage point.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, rose 4,000 to a seasonally adjusted 1.863 million during the week ending Aug. 10, the claims report showed.



Dollar Down and Oil Slips as Fed Readies Rate Cuts

A view shows an oil pump jack outside Almetyevsk in the Republic of Tatarstan, Russia June 4, 2023. REUTERS/Alexander Manzyuk
A view shows an oil pump jack outside Almetyevsk in the Republic of Tatarstan, Russia June 4, 2023. REUTERS/Alexander Manzyuk
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Dollar Down and Oil Slips as Fed Readies Rate Cuts

A view shows an oil pump jack outside Almetyevsk in the Republic of Tatarstan, Russia June 4, 2023. REUTERS/Alexander Manzyuk
A view shows an oil pump jack outside Almetyevsk in the Republic of Tatarstan, Russia June 4, 2023. REUTERS/Alexander Manzyuk

Oil fell for a fifth day in a row on demand jitters on Thursday, stocks were subdued in Asia, and the dollar hovered near one-year lows as Federal Reserve minutes signaled that US interest rate cuts are set to begin in a few weeks' time.
The minutes validated bets on a rate cut next month and said the "vast majority" of policymakers felt that if data came in as expected, a September cut was likely to be appropriate.
Oil prices fell, however, and at $75.97 a barrel, Brent futures were near the year's low, having lost nearly 6% in August so far as China's demand outlook weakens and looming rate cuts signal an expectation of a US slowdown.
Stocks, after a phenomenal rebound from early-month lows, were also kept in check, with US and European futures down about 0.1%, and MSCI's broadest index of Asia-Pacific shares outside Japan mostly flat.
"The first 200 days following the first rate cut tend to be challenging for equities, because it signals a deteriorating growth and profits environment," said Nick Ferres, CIO at Vantage Point Asset Management in Singapore.
Trade was thin in China and major indexes notched small losses, with electric vehicle stocks wobbly on tariff risks. Hong Kong's Hang Seng rose 0.5%, helped by an 8% gain in shares of electronics maker Xiaomi after upbeat results.
Surges in pharmaceutical firms Sumitomo Pharma and Chugai Pharm helped Japanese shares notch a three-week high in morning trade, as the market recovers from a stunning collapse in early August.
"I think the market's focus for the equity investor is changing a bit recently," said Daiki Hayashi, head of Japan sales and marketing at J.P. Morgan in Tokyo.
"Investors had been buying Japanese equities because they were cheap. Now, recently, we have been having a lot of discussions about single stocks," he said.
"If we started to see more of a growth story for individual companies, we might see another increase in equity prices."
DOLLAR DOWNTREND
Rates and currency markets see a US easing cycle as having further to run than other countries, since US short-term rates are higher, and have pushed down US yields and the dollar.
It also gives room for smaller markets to make cuts, and in South Korea, policymakers hinted at an October cut as they left rates on hold, as expected.
Treasuries rallied on Wednesday and ten-year yields were broadly steady at 3.80% on Thursday in Asia. Two-year yields held at 3.93%.
Interest rate futures markets have fully priced in a 25-basis-point cut in the US next month, with a 1/3 chance of a 50-bp cut. They project 222 bps of US easing by the end of 2025, against 163 bps for Europe.
The euro stood at $1.1144 in Asia, having touched $1.1173 on Wednesday, its highest since the middle of last year and above chart resistance at $1.1139, with the way open to the 2022 high around $1.1276. Sterling bought $1.3084 and hit a more than one-year high of $1.3119 on Wednesday.
"The unequivocal signal from the (Fed) minutes has been the catalyst for the latest leg down in the US dollar," said National Australia Bank's head of currency strategy, Ray Attrill.
"It is likely that the break above $1.30 on cable looks sustainable," he said, using a nickname for the sterling/dollar pair. "And similarly for the euro ... we're talking about potentially a $1.10-$1.15 range in coming weeks."
Checks on the dollar's weakness may come from US jobs data on Sept. 6 or purchasing managers index (PMI) data due later today, if it confounds market bets on interest rate cuts, or shows softness in Europe that weighs on the euro, Attrill said.