Nikkei retakes 69,000 after September payrolls rise only 29,000

Tokyo's Nikkei 225 opened Monday at 69,113.74, up 804.28 yen, or 1.18 percent, and was trading near 69,946.86 in late afternoon, up 1,637.40 points, or 2.40 percent. The morning session ended at 70,037.61, up 1,728.15 yen, or 2.53 percent, the first time the index had cleared 70,000 since early July. At 10:37 a.m. it stood at 70,024.27. The intraday high was about 70,072. The afternoon quote left it just under the round number it had already crossed.

The trigger was Friday's Employment Situation report from the U.S. Bureau of Labor Statistics. Nonfarm payrolls rose by 29,000 in September. The unemployment rate was 4.2 percent, and the number of unemployed people was 7.1 million. Both were little changed on the month. The jobless rate has sat between 4.1 and 4.3 percent since March. Health care added 17,000 jobs, slower than its prior 12-month average of 33,000. Ambulatory care added 13,000 and hospitals 12,000, while nursing and residential care lost 9,000. Private payrolls rose by 46,000. Government payrolls fell by 17,000, which is what pulled the headline gain down to 29,000.

The revisions that changed the summer

The September print did not arrive alone. July was revised from a gain of 21,000 to a loss of 10,000. August was revised from 162,000 to 133,000. The two revisions cut 60,000 jobs from the previously reported summer totals. The three-month average for nonfarm payroll growth stood at 51,000 after the report, above September's single month and well below the prior 12-month average monthly gain of 45,000 that the bureau cited as the recent baseline for comparison with a slowing trend. Average hourly earnings growth eased to 3.0 percent from a year earlier.

The household survey moved the other way on headcount and still produced more unemployed people. Employment rose by 406,000. The civilian labour force rose by 485,000. Unemployment therefore increased by 78,000. Participation edged up to 61.8 percent. The employment-population ratio was 59.2 percent. Black unemployment rose to 7.0 percent. Rates for adult men (3.9 percent), adult women (3.6 percent), teenagers (14.5 percent), white workers (3.6 percent), Asian workers (2.9 percent) and Hispanic workers (4.7 percent) showed little change.

What Tokyo bought

Wall Street had already traded the report on Friday. The Nasdaq composite rose 1.2 percent and the S&P 500 rose 0.7 percent, finishing less than 1 percent below its August record. The Nasdaq 100 closed at a record. Its futures were down about 0.1 percent in Asian hours, so Tokyo was not simply copying an overnight futures bid. Mainland China and South Korea were shut for public holidays. Hong Kong's Hang Seng sat near 23,976. The Topix was up about 1.1 percent at midmorning, to 4,136.61, a smaller move than the Nikkei, which is the usual pattern when the buying is concentrated in exporters and chip equipment.

Sector gains on the open were led by electrical machinery, machinery, and glass and ceramics. Mining and pulp and paper were lower. Tokyo Electron, the chip-equipment maker, was up 5.2 percent in afternoon trade. SoftBank Group gained 3.1 percent. Advantest and Fast Retailing were also firm on the open. Money-market pricing after the payrolls report put the chance of a Federal Reserve rate rise this month below 25 percent. The 10-year Treasury yield was still near 5.25 percent, close to a two-decade high, after the Fed's first rate increase in three years. A softer jobs print changed the October odds. It did not reset the level of yields.

The limit of the rally

The 70,000 line is a round number, not a valuation. The index cleared it in the morning and was back under it in the afternoon while still up more than 2 percent on the day. The durable fact from Monday's session is the link between a 29,000 payroll print, a 60,000 downward revision to July and August, and a Tokyo open that recovered 69,000 for the first time in about six weeks. The next test is whether that bid survives a week in which China and Korea reopen and the Fed's October meeting is still on the calendar.