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On 06 September 2019 - US mixed after jobs data, Powell comments; Europe, Asia higher

Anne D Picker

Anne D Picker - Econoday

Market still sees 25 basis point US rate cut in September.

US markets

US equities were ending mixed Friday as US jobs data and comments by Fed Chair Jay Powell left intact expectations for slowing growth and a Fed 25 basis point rate cut in September. The Dow industrials rose 0.3 percent; the S&P 500 rose 0.1 percent, and the NASDAQ was off 0.2 percent.

Risk assets were bolstered by other signs of central bank accommodation, but uncertain about how aggressive the stimulus will be. Signs of easing included a well-telegraphed Chinese cut in bank reserve ratios, and a comment from Bank of Japan Governor Haruhiko Kuroda, who said the BOJ could push interest rates further below zero. Additionally, most expectations ahead of next week’s ECB policy meeting call for a cut in the deposit rate and a restart to the bank’s bond purchases.

Among stocks in the S&P 500, materials shares outperformed, with help from chemicals. Consumer staples rose, led by tobacco. Health care outperformed, with pharma leading. Communications shares lagged, with Google (down 0.6 percent) and Facebook (down 1.8 percent) hurt by news about US antitrust investigations. Automakers were hit by a report that the Justice Department is probing whether there was collusion on emissions standards linked to California’s air quality rules.

Among companies in the news, Lululemon Athletica, a sports clothing store, rose 7.8 percent after an earnings beat and it raised its full-year guidance. Discount retailer Costco rose 2.3 percent as its same-store sales beat expectations. Docusign, an electronic signature company, rallied 22 percent on unexpectedly strong billings, despite an earnings miss.

In economic news, US employment report showed weakness in payroll growth, at a headline 130,000 for nonfarm payrolls, which is 20,000 short of the bottom of Econoday's consensus range. Private payrolls, which exclude a Census-driven 34,000 rise in government payrolls, came in at only 96,000 which is 40,000 short of the low estimate. Manufacturing reached the consensus range but the 3,000 total was 5,000 short of the median with July revised a very steep 12,000 lower to growth of only 4,000. On the upside, there was an outsized 0.4 percent rise in average hourly earnings, a result that speaks to wage pressures tied to a narrowing supply of labor. Earnings have now posted four straight elevated readings, at 0.3 percent in July, June and May as well. The participation rate was up a sharp 2 tenths to 63.2 percent. The unemployment rate did not move in August, holding at a low 3.7 percent.

These data reflect observations at 4:00 PM US ET:  Dated Brent spot crude oil rose 70 cents to US$61.51, while gold fell by US$11.10 to US$1,515.20. The US dollar was mixed, edging higher against the euro, the British pound, and the Swiss franc but declining versus the yuan as well as the Canadian and Australian dollar. The US Treasury 30-year bond yield was down 3 basis points at 2.02 percent while the 10-year note yield was down 1 basis point at 1.55 percent.

European markets

European markets edged up Friday after news China would cut bank reserve requirements to stimulate lending. The Europe-wide STOXX 600 rose 0.3 percent, the German DAX was up 0.5 percent, and the French CAC gained 0.2 percent. The UK FTSE-100 rose 0.2 percent.

On the negative side for sentiment, US and European data came in mixed to weaker, with German industrial dropping unexpectedly, and a mixed US jobs report, featuring weaker than expected payroll gains but stronger earnings growth. Expectations for next week’s ECB policy council meeting have been clouded by comments from policy-makers casting doubt on the need for aggressive stimulus, but markets generally expect outgoing ECB President Mario Draghi to force through a final set of pro-growth measures.

Outperforming sectors in the Stoxx 600 included retail, media, and basic resources.  Underperformers included utilities, oil & gas, and food & beverages. UK water utilities attracted attention after a ratings downgrade for United Utilities, which fell 2.9 percent. German manufacturer Thyssenkrupp rallied 4.7 percent on news about private equity buyers for its elevator business.

In economic news, German industrial goods production failed to rebound as expected in July. Albeit following a smaller revised 1.1 percent monthly drop in June, output surprisingly contracted a further 0.6 percent, its third decline in the last four months and its first back-to-back decrease since last October/November. Annual growth actually picked up from minus 4.8 percent to minus 4.2 percent but this simply reflected an even sharper decrease in production a year ago.

Asia Pacific markets

Major Asian markets closed higher Friday, extending gains made earlier in the week. The regional data calendar was light Friday ahead of the US employment report, while US-China trade developments were also limited. Hong Kong’s Hang Seng index was among the strongest performers in the region on both the day and the week with gains of 0.7 percent and 3.8 percent respectively, though investors remain concerned about the potential for further unrest over the coming weekend after the government’s decision mid-week to withdraw controversial legislation. The Shanghai Composite index made similar gains, up 0.5 percent on the day and 3.9 percent on the week. Both the Hang Seng and the Shanghai Composite indices were boosted late in the session by sharp gains in telecommunications shares after news that the Italian government would impose conditions but still allow the involvement of Chinese companies in the development of 5G networks. 

Japanese shares also rose further Friday, with the Nikkei index up 0.5 percent on the day and 2.4 percent on the week and the Topix index up 0.2 percent on the day and 1.7 percent on the week. Major exporters were among the strongest performers after the Japanese yen weakened against the US dollar. Australia’s All Ordinaries index rose broadly in line with other regional markets Friday with a gain of 0.5 percent but underperformed on the week, closing up just 0.8 percent.

Household spending in Japan, in real terms, increased 0.8 percent on the year in July slowing from growth of 2.7 percent in June and below the consensus forecast for an increase of 1.0 percent. The slowdown in headline year-on-year growth was largely driven by weaker spending on food and utilities, partly offset by a rebound in spending on housing. Retail sales data released last month also showed weaker year-on-year growth in July.

Looking forward

The following indicators will be released this week...

Europe

 

 

Sep-09

Germany

Merchandise Trade (July)

 

UK

Industrial Production (July)

 

 

Monthly GDP (July)

Sep-10

France

Industrial Production (July)

 

Italy

Industrial Production (July)

 

UK

Labor Market Report (August)

Sep-12

Eurozone

Industrial Production (July)

 

France

CPI (August)

 

Germany

CPI (August)

 

Italy

Unemployment Rate (Q2)

 

Switzerland

Producer and Import Price Index (August)

Asia Pacific

 

 

Sep-08

China

Merchandise Trade (August)

Sep-09

Japan

GDP (Q2f)

Sep-10

China

CPI (August)

 

 

PPI (August)

Sep-12

India

CPI (August)

 

 

Industrial Production (July)

 

Japan

Machine Orders (July)

 

 

PPI (August)

 

 

 

Americas

 

 

Sep-10

US

JOLTS (July)

Sep-11

Canada

Housing Starts (August)

 

US

PPI-FD (August)

Sep-12

US

CPI (August)

 

 

Jobless Claims (Week of Sept. 7)

 

 

Treasury Budget (August)

Sep-13

US

Business Inventories (July)

 

 

Consumer Sentiment (Sept p)

 

 

Import & Export Prices (August)

 

 

Retail Sales (August)

Global stock markets

 

Index

6 Sep 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

26797.46

69.31

0.3

 

NASDAQ

8103.07

-13.76

-0.2

 

S&P 500

2978.71

2.71

0.1

Canada

S&P/TSX Comp

16535.33

-39.48

-0.2

Europe

 

 

 

 

UK

FTSE 100

7282.34

11.17

0.2

France

CAC

5603.99

10.62

0.2

Germany

XETRA DAX

12191.73

64.95

0.5

Italy

MIB

21947.33

-7.74

0.0

Spain

Ibex 35

8990.1

-2.60

0.0

Sweden

OMX Stockholm 30

1601.95

4.61

0.3

Switzerland

SMI

10073.82

90.75

0.9

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6752.73

31.98

0.5

Japan

Nikkei 225

21199.57

113.63

0.5

 

Topix

1537.1

2.64

0.2

Hong Kong

Hang Seng

26690.76

175.23

0.7

S. Korea

Kospi

2009.13

4.38

0.2

Singapore

STI

3144.48

-2.58

-0.1

China

Shanghai Comp

2999.6

13.73

0.5

Taiwan

TAIEX

10780.64

23.71

0.2

India

Sensex 30

36981.77

337.35

0.9

Note: all releases are listed in local time.

Important Information

Econoday Inc. is a US company that provides financial commentary and indicators to industry professionals. All information provided and views expressed are those of Econoday. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only. Past performance is not a reliable indicator of future results. The value of investments can go down as well as up and investors may not get back the amount invested.