Yields Soar to Fresh Highs Following Strong U.S. Claims Data

U.S. Yields continue to move higher reaching the 1.84% level for the first time since June of 2016.  European yields are also on the move higher, with the Bund hitting 8 basis points for the first time in nearly a year.  Stock in Europe are consolidating while U.S. stocks are higher at the open, on the back of higher oil prices which notched up gains following Wednesday’s unexpected draw in crude oil inventories as reported by the Department of Energy.  U.S. Durable goods were in line with expectations while jobless claims continued to edge lower showing strength in the jobs market.

U.S. durable goods orders dipped 0.1% in September after edging up 0.3% in August which was revised from 0.1%. Transportation orders fell 0.8% from 0.6%. Excluding transportation, orders rose 0.2% versus 0.1% previously which was revised from -0.2%. But, nondefense capital goods orders excluding aircraft plunged 1.2%, erasing the 1.2% August jump which was revised from 0.9%.  This is a proxy for business investment which is not a good sign. Shipments climbed 0.8% following an unchanged August print which was revised up from -0.2%. Nondefense capital goods shipments excluding aircraft rose 0.3% from unchanged which was revised from -0.1%. Inventories were up 0.1%, the same as in August which as revised from 0.2%. The mix of data are mostly disappointing, but may not give the markets much directional impetus, which has kept yields buoyed.

Jobless Claims Continue to Impress

On the jobs front, U.S. initial jobless claims fell 3k to 258k in the week ended October 22 from a revised 261k previously which was 260k. That brought the 4-week moving average up to 253.0k from 252.0k which was revised from 251.75k. Continuing claims declined 15k to 2,039k in the week ended October 15 versus the prior 4k rise to 2,054k which was revised from 2,057k.

Jobs data in Canada was better than expected helping the Loonie gain some traction. Canada average weekly earnings surged 0.8% month over month in August, leaving a 1.6% gain relative to August of 2015. Earnings improved on an annual basis in all provinces except Alberta, where earnings were little changed. The establishment survey’s estimate of non-farm payrolls fell 50.4k in August after the 19.3k drop in July. The labor force survey showed a 26.2k rise in August after the 31.2k drop in July. Employment in September surged 67.2k.

Growth data in the UK was stronger than expected with Q3 GDP notching up 0.5% quarter over quarter growth. This compares to expectations of 0.3% and 2.1% growth, and comparing to Q2 growth rates of 0.7% quarter over quarter and 2.1% year over year. The service sector drove overall growth, as it expanded by 0.8% quarter over quarter.

Oil demand in the U.S. remains strong. Total products demand improved to 20.4 million barrels per day, up by 4.3% from the same period last year. Over the past month gasoline demand averaged over 9.1 million barrels per day, down by 0.1% from the same period last year per the EIA report.