REPORT
By Ovunc Kutlu & Gulbin Yildirim
U.S. letter, week beginning August 8

- "U.S. labor market earns gold medal in July"

In the U.S., last week's biggest economic development was the strong employment report released by the Labor Department on Friday.

The focus of the global markets and of non-farm payrolls increased by 255K, beating expectations while the unemployment rate remained constant at 4.9 percent partly due to the somewhat higher labor force participation rate. The market expectation for employment growth, which drew a mixed picture in May and June, was around 180K.

In addition to the better-than-expected July payroll gain, the strength of the report was underscored by an upward revision of 18k to the May and June data.

Furthermore, wages were up a sizable 0.3 percent and the year-on-year rate came in at 2.6 percent. For the first time since January, the workweek moved higher, up 1 tenth of an hour to 34.5 hours.

U.S.-based international consulting firm RSM's Chief Economist Joseph Brusuelas told Anadolu Agency via email that "the U.S. labor market earned a gold medal in July as broad-based employment gains show the economy is in much better condition than the recent GDP report would suggest."

The dollar soared while gold fell as the markets began pricing in the employment report. Expectations regarding the Fed's interest rate also needed adjustment and the question of whether or not there will be an interest hike this year transitioned to "Will it happen in September or December?"

Leading economists and financial institutions see a higher chance for action in the December Federal Open Market Committee (FOMC) meeting.

Other official data released Friday showed that the U.S. trade deficit rose 8.7 percent in June, reaching the highest level of the last 10 months.

Experts suggested that the more-than-expected rise in the deficit would adversely affect the second quarter GDP data and make the Fed hold off an interest rate hike in September.

Personal income and spending were also other critical data of the week. According to official figures, personal spending increased by 0.4 percent in June, slightly above expectations, while personal income rose 0.2 percent versus a 0.3 percent forecast.

The Fed’s order of a payment penalty of $36.3 million from Goldman Sachs to pay for allegedly using confidential regulatory information to win clients, along with Apple's entrance to the U.S. electric markets, were among other top newsworthy developments.

- Trump, OPEC, retail sales

The U.S. financial world will start the week with Republican presidential candidate Donald Trump's speech on the economy.

Trump seems to scare the markets with aggressive economic promises such as applying 40 percent tax on goods imported from China, replacing Fed President Janet Yellen and punishing American companies producing abroad.

The week will be weak in terms of data flow except retail sales, which will be announced Friday. The interest decision of the Reserve Bank of India, the Eurozone’s GDP for the second quarter, and OPEC's monthly report are among other developments that global markets will closely follow this week. 

08 Aug,2016

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