The big US jobs data will be coming out later in the day today. Consensus is working with a reading of about 2,20,000 approximately. The risks to that consensus are solidly to the upside, says Nick Parsons of National Australia Bank, because the Institute for Supply Management (ISM) survey showed that the employment component in the services one was at a 10-year high. Also, overnight the small business survey showed its hiring intentions were very strong. So, a consensus is 225,000, he told CNBC-TV18.
Below is the verbatim transcript of Nick Parson’s interview with Nigel D’souza and Sumaira Abidi on CNBC-TV18.
Nigel: Big jobs data coming out today, consensus is working with a reading of about 2,20,000 approximately. What is your estimate and how will you read the outcome of it?
A: The risks to that consensus are solidly to the upside. The reason to that is if you look at the Institute for Supply Management (ISM) surveys that we had earlier this week, the employment component in the services one was at a ten year high. And overnight the small business survey also showed its hiring intentions were very strong. So, a consensus is 225,000. I think the risks are probably to the upside. But here is the dilemma for the markets, and here is the dilemma for your viewers as well who I know are active investors because if we knew, if we told now what the figure was, I am pretty sure, we would not know what to do about it because you can just as easily make it a bullish case for equities on the back of a strong number or a weak number and indeed you can make a bearish case for them, whatever the number is.
And I think this is the problem, we are all keenly awaiting the biggest economic statistic of the month and when we get it, most people, myself included, will not have a clue what it is going to do to the market.
Sumaira: But, which way do you think the Fed might swing either way?
A: Now, that one I think is a little clearer and anything that shows employment still growing at trend and by that we are talking 220,000-230,000 a month plus earnings numbers because the Fed is acutely sensitive to the inflation side of its mandate as well as to the employment side. So, we will be looking at wages. There is a very good chance that the wage growth could pick up from the two percent that we saw last month to something like 2.2 percent or possibly even 2.3 percent.
And it is very important when this data is out. Bear in mind, the words of Dennis Lockhart earlier this week. Mr Lockhart who is a Federal Open Market Committee (FOMC) voting member said that you have got to look for reasons not to tighten, rather than for reasons to raise rates. In other words the debate has kind of shifted. So, even if it is a number at or around consensus, that will not change the Fed’s plans such as they are to go in September. It would have to be a bad number to make them not tighten rather than a really good number to make them go.
Nigel: I wanted to ask you about the other market that is in focus today, the Shanghai market. It is higher by close to around two percent and it has done quite well in today’s trade but, just around a month ago, we heard that the government is going to be pumping in funds and supporting that market and for all that talk, that market has gained two percent in the last entire month and yet it is close to around 25 percent away from those highs that we saw earlier this year. What is your take on the Shanghai market going ahead? Do you think it is still as brittle?
A: A simple maxim is always worth bearing in mind that a market that does not go up on good news is a market that is not going up. And the good news also have been the support measures that were introduced, but in fact, what we have seen is a lot of people exiting that market. I read something like 23 million retail accounts have actually been, stock trading accounts have actually been closed over the course of the last month. Since the end of June, 23 million stock accounts have been closed.
Now, this reflects broader dissatisfaction with the performance of the market. And although the authorities have actually tried to prevent people selling or what they call manipulating the market, what they cannot do is prevent the absolute exodus of people who simply lost interest in it. That ought to be a worry and that for me is something that we will have to watch over the course of the next couple of months to see if it develops into a broader trend.
But, no, despite all the support measures that have been wheeled out, the market resolutely fails to rise. One thing that really is off-putting to international investors too is the self evident rigging that happens in the last hour of trading. Because we get into London, we are at our desks around 6:30 in the morning, there is still an hour and a half to go to the close and in that hour and a half, we have often seen orders of magnitude of two, three and four percent in the last hour of trading. And that really is making things very difficult indeed. So, they may have succeeded in putting a floor under the market, but they still have got lots of volatility and individual stock market investors are being turned away.
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