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US – Canada Jobs report, USD/CAD, US Budget Surplus; Market update 17th Jan 2014

By Musabbir Mazhar

The US Jobs number came out last Friday (10th Jan) at 74,000 job additions for December which has been taken by the markets as a shocker and the US 10 year treasury yields went down on the news. But more sense should be put into this- Workers weren’t looking for work for almost a week due to holiday season and there was bad weather condition – a proof of that is the fact that construction jobs were low. You have to look beyond just one number – The jobs number has been improving for the last four months – with the last month at 241,000 after adjustment.  

US President Obama departs for Nelson Mandela's memorial service
Another shocker was that the unemployment rate dropped to 6.7% from 7% in december – the reality is that about 347,000 people left the labor force. The labor participation rate fell to 62.8% which is a 35 year low.

Janet Yellen takes over as the Fed Chairwoman after jan 28th meeting.

Barack Obama, Ben Bernanke, Janet Yellen
The ISM Manufacturing data were low for december but again – the ISM data has been on a rise for the last 6 months.

US Retail sales rose 0.2% & core retail sales rose a good 0.7% for december.

US housing starts for november was 1.09 Million which was a 22.7% rise for 2013 and the US housing prices rose 13% in 2013 – I see the US housing prices rising about above 6% in 2014.

US posted a record trade surplus of $53.2 Billion for december – compared to 1.12 billion of deficit one year ago.

I see that the Fed would continue to taper and increase the rate of taper in the coming FOMC meeting.

Canada posted 46,000 job losses against expectation of a 14000 job additions for december. The CAD Dollar took a downward hit due to this – the USD/CAD was trading at 1.09 –  I look at the CAD dollar depreciating and the USD/CAD going to 1.14 in 2014. Again, there was a Trade deficit of 0.9 Billion for december – 9x more than expected.

The S&P/TSX index was at 13,831 – it has risen 9.6% in 2013 and I see it rising less than that in 2014 0r around a 5% rise since materials sector would be under pressure.
The S&P 500 was at 1,842 – the index rose 29% in 2013 – I see the the index still going up in 2014 – 20% up at the end of the year at 18x earnings.

WTI is at 94 USD/bbl – Brent is at 105.68 USD/bbl after taking a sharp fall from 107 on last trading day. I see the oil prices going much lower than this – WTI at 88 usd/bbl – and Brent at 102 usd/bbl if not less at end of year. This can be expected since World oil supplies are expected to increase with US Shale reserves booming – increased oil supplies in Iraq, Libya and Iran should cause downward price pressure.

Gold is trading at 1,241 – I see the gold prices falling further in the year as I see the dollar appreciating and investors would not find a ‘safe haven’ in gold now.

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