The initial jobs report for the month of September released on Oct 4 caused the 10-year Treasury yield to move higher, to 3.967% while the 2-year Treasury yield rebounded to 3.87%. The yield curve remains normal.
It appears that the US economy remains on a firm footing. The September jobs report was better than expected. Nonfarm payrolls rose by 254,000 for the month, up from a revised 159,000 in August and better than the 150,000 Dow Jones consensus forecast, according to a CNBC report. The unemployment rate fell to 4.1%, down 0.1 percentage point m-o-m. August’s total was revised up by 17,000 while July saw an addition of 55,000, taking the monthly growth up to 144,000.
CNBC reports that the upward revisions from previous months coupled with the September report eases concerns about the US labour market weakening. On the other hand, it may lead to the Federal Reserve reverting to a more gradual pace of interest rate reductions.
Strength in job creation spilled over to wages, as average hourly earnings increased 0.4% on the month and were up 4% from a year ago. Both figures were ahead of respective estimates for gains of 0.3% and 3.8%, according to the US media.
As a result, the 10-year Treasury yield has rebounded and has moved above its 50-day moving average at 3.8235%.
In other US news, the port strike is over. US media reported that a major union for U.S. dockworkers on the East Coast and Gulf Coast agreed to a tentative deal on wages with the United States Maritime Alliance on Oct 3, port workers back to work.
See also: STI steadies despite overbought US markets and rising US risk-free rates
Locally, the Lion-OCBC Securities HS TECH ETF rose to its highest level since its IPO during the week of Sept 30 - Oct 4. More concerning is the all-time high of short-term RSI, and quarterly momentum during the week. By Oct 4, short-term RSI had retreated from its all-time high and is likely to start forming a negative divergence with the share price. Immediate support appears at 75 cents. HSTECH ended the week of Sept 30- Oct 4 at 83 cents. The ETF's consolidation moves are likely to be mild even as bullish sentiment subsides.
The Hang Seng Index ended the week of Sept 30- Oct 4 at 22,736, just ahead of the top of a 2.75-year base at 22,688. It appears increasingly likely that some form of consolidation is likely to appear in the near term as both 21-day RSI and quarterly momentum have failed to move higher as the index advanced, a sign of being in an overbought situation as some latent weakness develops. Any consolidation at this stage is likely to be mild.
Our own Straits Times Index just plods along. The short-term chart shows the onset of some consolidation as both quarterly momentum and short-term RSI are retreating. Immediate support appears at 3,565. If this level does not hold, the next support is at 3,500. The STI ended at 3,589 on Oct 4.
