Strong US wage growth upsets last week's thinking while JB Hi Fi plays out a buy the rumour sell the fact scenario

Stronger than expected US wage growth has called into question last week’s accepted wisdom that the US Dollar would fall as moderating economic growth pressured the Fed to delay its rate hike programme.

The 0.5% increase in hourly wages and another drop in the unemployment rate have markets on alert for the possibility that the US economy is entering the next phase of its recovery. This is a stage where job growth slows as the recovery matures but wage growth begins to pick up as the supply of skilled labour tightens. More evidence is required to conclude the US economy has reached this stage. If it has, the Fed will have reason to get ahead of improving inflation with its rate increases.

The bounce in the US Dollar, following better than expected US wage growth also has markets nervous about how sustainable the recent rally in oil and other commodities is. This has put pressure on energy stocks this morning.

Monthly figures on China’s Foreign Exchange Reserves have gained new prominence with markets focussing on the size of the war chest available to defend the Yuan. The January data released over the weekend helped to settle short term nerves with reserves being run down less than generally expected.

JB Hi-Fi’s result shows a continued pattern of winners and losers in the patchy and rapidly evolving, retail sector. The company has been able to produce solid same store sales growth and it’s pleasing to see this continue in January. Despite this solid result, the market appears to be playing out a ‘buy the rumour sell the fact’ scenario for JB Hi Fi, with the stock now down 9% from its peak after very strong gains during January.