Jobs Increase May Not Be Enough for Fed to Begin Tapering; 10-Year Treasury Notes Break Through 3%; Brent Crude Set for Longest Rising Streak in Months
Jobs Increase May Not Be Enough to Begin Tapering (Reuters)
This morning’s U.S. jobs report showed a slight reduction in the unemployment rate to 7.3%, falling from 7.4% in July, with an additional 169,000 in nonfarm payroll during August. But the latest jobs report from the U.S. Department of Labor also included a sharply lower number of new jobs, 104,000, in July, compared to the previously estimated number of 162,000 nonfarm jobs for that month. Will this relatively small increase in new jobs be enough to convince the Fed that the economy has improved sufficiently to cut the government’s $85 billion a month stimulus plan, even though the unemployment rate just fell to its lowest level in four-and-a-half years? We’ll know soon enough, as the next Fed meeting is scheduled for Sept. 17-18. From now until then, investors would be wise to consider exit strategies should the Fed turn its monetary spigot down.
For the first time since July 2011, the U.S. Treasury’s 10-year note yields rose to 3 percent. This move, accompanied by the expected strengthening in the U.S. jobs market, is expected to be enough to convince the Fed to begin reducing its economic stimulus program this month. This sentiment was echoed by Jason Rogan, director of U.S. government trading at Guggenheim Partners LLC in New York, “Rates are moving higher as we’ve seen nothing but good to strong economic data.” So the question facing investors like you now is this: Is 3 percent enough to convince you to get back into government-backed debt?
Brent Crude Set for Longest Rising Streak in Months (Bloomberg)
Ahead of President Obama’s quest for diplomatic support for attacking Syria, brent crude oil prices pushed higher for their fourth weekly gain — the longest streak of appreciation since February. Obama begins meeting G-20 leaders in St. Petersburg, Russia, today, and the top priority on his agenda is winning backers for his planned armed intervention in Syria. However, because it’s no certainty he’ll win such support, some analysts feel there’s still more upside in oil ahead. According to Gerritt Zambo, of Bayerische Landesbank in Munich, “A military strike is not fully priced in.” So how confident are you that Obama will win support… confident enough to invest in oil waiting for the price of war to begin?