The unemployment numbers out today had been widely anticipated to be positive, but they didn’t exactly deliver. That sent stocks and exchange traded funds (ETFs) down swiftly in early trading.
The headline number for payrolls released early Friday was disappointing due to slow growth in the private sector. However, overall numbers for May payroll jobs surged 431,000, following a 290,000 jump in April, and a gain of 208,000 in March. The disappointment stems from the fact that most of the jobs added were temporary Census workers, which added 411,000 temporary jobs to the payroll, accounting for nearly all of the job creation in May. Private non-farm employment only increase by 41,000, following a 218,000 boost in April, which is the slowest growth since the beginning of the year. The unemployment rate dipped to 9.7%.
Naturally, this report had a contagion effect that rippled through the markets.
Oil prices dropped below $73 a barrel Friday after the payroll report showed many U. S. companies are still wary of hiring new workers. Prices had been rising recently, after falling from $87 a month ago, amid improving demand for crude products, and in response to news that the United States would stop all drilling operations in the Gulf of Mexico after the worst spill in American history. While continued concerns over Europe’s debt issues and slowing growth in China, the summer driving season should continue to increase demand for oil. [What the BP Oil Spill Means for ETF Investors.]
- United States Oil (NYSEArca: USO)
The euro reached $1.2058 Friday, a new four-year low for the European Union currency amid fresh debt concerns. Fueled by the continuing struggle to control the euro-zone’s sovereign debt issues, and new concerns regarding Hungary’s debt status, the euro dropped to its lowest level ever against the swiss franc, a safe haven for investors abandoning the common EU currency. Despite the gloomy euro performance and a big drop in performance in Greece, EU first quarter growth was confirmed at 0.2%, meaning the eurozone has seen growth for three straight quarters following the continent’s deepest, longest recession in decades. [How to Hedge Euro Currency Risk With ETFs.]
- CurrencyShares Euro Trust (NYSEArca: FXE)
There’s a new entrant into the eurozone worries: Hungary. The Eastern European nation has a new government in place and investors are concerned that bad news is about to emerge from the Treasury. The cost of insuring Hungarian debt has surged to its highest level in nearly a year. Although SPDR Barclays Capital International Treasury Bond (NYSEArca: BWX) has no exposure to Hungary, it’s worth watching while this plays out, because concerns about the country could further pressure the already-struggling PIIGS (Portugal, Italy, Ireland, Greece and Spain), several of which it does have some exposure to. [Financial ETFs: Emerging Markets on Top?]
Japan has hastily put in place a new prime minister: Naoto Kan. The Democratic party is still the ruling party in the country, but voters are skeptical after the previous prime minister, Yukio Hatoyama, abruptly quit his position after just eight months in office. The news of the appointment sent the Japan ETF down about 1% in early trading. Kan plans to uphold an agreement with the United States about the relocation of an air base on Okinawa. [Rising Tensions Hurt South Korea ETF.]
- iShares MSCI Japan (NYSEArca: EWJ)
Read the disclaimer; Tom Lydon is a board member of Rydex|SGI.
Aaron Hurst contributed to this article.
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