1. Stock market volatility continued this week, seeming to hinge heavily on improvements in the price of crude oil.
2. The number of Americans filing initial claims for state unemployment benefits rose by another 6,000 claims last week to a new seasonally adjusted level of 278,000. The prior week’s claims were unrevised and last week’s data falls outside of the reporting period for the February Non-Farm Payrolls Report which was released on Friday morning.
3. February’s Non-Farm Payrolls Report showed that job additions to the U.S. economy were better than expected. The report showed the addition of 242,000 jobs to the U.S. economy in February, beating economists’ expectations for the addition of 192,000. The unemployment rate remained unchanged at 4.9 percent and December and January’s reports both saw revisions to the upside. Despite what appears to be an extremely positive set of data, there were some key factors which remain concerning about the true state of the U.S. economy. Average hourly earnings declined, hours worked declined, and a large majority of the jobs that were added to the economy came from part-time sectors such as the restaurant and retail industries. Declines in hourly wages are of particular concern since that is an indication that inflationary pressures are extremely low in the U.S. economy.
4. Reuters reported this week, citing “two reliable sources”, that China intends to lay off a staggering 5 to 6 million state workers over the next several years in an effort to reduce “industrial overcapacity and pollution”. The layoffs will likely cost the Chinese government billions in “relocation” funds and could trigger a rash of debt defaults as local businesses who are forced to shut their doors find themselves unable to repay loans. The news comes just after recent reports indicate further slowdowns in China’s factory activity. The official manufacturing Purchasing Managers’ Index (PMI) for February came in at 49, 1 point below the level of 50 which is the line between expansion and contraction. A private reading of PMI provided by Caixin showed an even lower level of 48. Moody’s ratings agency this week also cut its outlook on China’s credit rating to negative from stable citing “a weakening of fiscal metrics and a continuing fall in foreign exchange reserves.”
5. The United Nations (U.N.) voted to expand existing sanctions on North Korea following its nuclear test in January and a long range rocket launch in February. U.S. Ambassador Samantha Power said “the sanctions go further than any U.N. sanctions regime in two decades and aim to cut off funds for North Korea’s nuclear and other banned weapons programs.” The new sanctions call for the inspection of all cargo going to and from North Korea and placed North Korean trade representatives located in Syria, Iran and Vietnam on a U.N. blacklist. Previously shipments to and from North Korea were only inspected if there was “reasonable grounds” to believe they contained contraband goods. North Korea’s response to the news was to fire what appeared to be several short-range missiles into the sea off its coast and to order its military on “standby for nuclear strikes at any time”. The escalating rhetoric out of North Korea is typical ahead of the yearly joint military exercises which the U.S. and South Korea carry out every year at this time, but the recent display of its nuclear ambitions and capabilities is concerning, nonetheless.
6. The European Union (EU) announced a new aid program on Wednesday that would essentially create a disaster relief fund worth up to 700 million euros initially. The program is being created in response to the growing migrant crisis that is crippling countries such as Italy and Greece, in particular, whose economies are still struggling to make a comeback from the “Great Financial Crisis”. Greece, which has become the main channel through which migrants flow into the rest of Europe, has asked the European Union for 480 million euros to help it address the massive influx of refugees. The situation in Greece has become even more urgent as other EU members have closed their borders to additional migrant refugees, leading to a growing number of the displaced being stranded in Greece and escalating the crisis even further.
7. Oil prices continued to improve this week, heading into the mid-$30-a-barrel range. Friday’s better than expected Non-Farm Payrolls report in the U.S. sent oil higher by another 4 percent as traders seemed to speculate that the U.S. economy might actually avoid a recession, despite obvious continued pressure to the downside from a faltering global economy.
8. The euro began the week trading basically sideways against the U.S. dollar, then had a brief spike higher from which it quickly dropped and then traded flatly lower against the dollar until Thursday.

On Thursday the euro began moving higher again, and went positive for the week late that afternoon. The euro moved higher again on Friday and will close the week positive against the U.S. dollar. The Japanese yen began the week moving higher against the U.S. dollar, but had peaked by Tuesday and began a decline which sent the yen negative against the dollar by mid-Wednesday. The yen quickly recovered some ground and traded basically sideways in a series of small peaks and valleys for the rest of the week. The yen will finish the week essentially flat against the U.S. dollar.

– Trading Department, Precious Metals International, Ltd.