Week 31 in Brief
On Friday, movements in the US equity markets were relatively mixed, with the release of the July Jobs report coming in as better-than-expected.
The labor market added 528,000 jobs in July, over twice the Dow Jones estimate of a 258,000 increase. The unemployment rate in the states also trickled down to 3.5%, below the 3.6% estimate. A 5.2% year-to-year growth in wages also signaled inflation is still a problem, and that the central bank could be more aggressive with interest hikes.
How did the major indices perform?
- The Dow Jones Industrial Average gained 76.65 points, or 0.23%, to end at 32,803.47. The index lost 0.35% for the week.
- The S&P 500 shed 0.16% to end at 4,145.19. For the week, however, the index advanced 0.5%.
- The Nasdaq Composite lost 0.50% Friday, falling to 12,657.56. The index posted a 2.5% gain for the week.
What drove the U.S. market?
- Tesla shareholders voted for an incoming 3-for-1 division that will be its second in two years. The world EV leader looks to make its stock more affordable to retail investors. Tesla first announced this proposal In June 2022, when the shares were trading at $700.
- US companies Carvana and Cloudflare reported their fiscal Q2 earnings, sending their stocks into massive gains. Cloudflare gained more than 25% after the earnings report.
- July’s jobs report came in better than expected, signaling that recession fears may be winding down but also showed inflation is still running hot.
How did the European markets perform?
- In Europe, The pan-European STOXX 600 index lost 0.76% on Friday but still ended the week in gains. This was after the release from the Bureau of Labor Statistics. The U.S. jobs data stoked expectations of continued hawkish Fed policy.
- The standout stocks in the STOXX 600 were British financial services company Hargreaves Lansdown, which advanced nearly 5%, and Deutsche Post which advanced 4%, thanks to better than expected second-quarter profits.
- On the opposite side of the spectrum, German automotive and arms manufacturer Rheinmetall slumped nearly 12% after cutting its forward guidance on defense orders.
- On Thursday, the Bank of England hiked interest rates by 50 basis points. The bank also has a gloomy prediction of the English economy entering a prolonged recession in the fourth quarter and peak inflation of above 13% in October.
How did Asian markets perform?
- Despite political tensions between China and the US over Pelosi’s visit to Taiwan, China’s blue-chip stock index CSI300 posted its biggest jump in more than five weeks on Friday. The Index rose 1.4% to end at 4,156.91, its biggest jump since June 30. For the week, the CSI300 index edged down 0.3%.
- This jump was fueled by a rally in information technology companies, after US legislation to help its chip firms compete with Chinese rivals stoked expectations of more domestic support. China’s CSI Information Technology index jumped 4.3%. The semiconductor sub-index soared nearly 7% and more than 14% for the week, its best weekly performance in two years.
- The Hang Seng index rose 0.14% to 20,204.40, while the China Enterprises Index gained 0.4% to 6,905.17. For the week, the Hang Seng Index was up 0.2%.
- In Japan, the benchmark Index, the Nikkei, surged above the 28,000 psychological barrier for the first time in nearly two months to hit 28,190.04, its highest since June 9. This was the third straight day in gains, rising 0.9% for the week. Japan’s benchmark index was helped by upbeat corporate earnings reports.
- The broader Topix index gained 0.85%.
Bonds and Commodities
- Crude prices in the US advanced on Friday as the prospect of strong demand for the commodity rose. These gains were not enough, as most prices ended the week at multi-month lows.
- On Friday, U.S. crude rose 0.53% to settle at $89.01 per barrel, while Brent settled at $94.92 per barrel, up 0.85% on the day.
- In Europe, The oil and gas sector fell 1% as crude prices languished near their lowest since the start of the conflict in Ukraine, with markets juggling concerns of supply shortage and slower demand.
- U.S. Treasury yields rose and a closely watched part of the yield curve touched its deepest inversion since August 2000 on increased odds of another 75 basis point interest rate hike from the central bank in September.
- Benchmark 10-year notes last fell 42/32 in price to yield 2.8287%, from 2.676% late on Thursday.
- The 30-year bond last fell 65/32 in price to yield 3.0662%, from 2.961% late on Thursday.
- The US dollar had yet again, a good week, thanks partly to the employment report showing a strong US employment update for July.
- The dollar index rose 0.84%, with the euro down 0.63% to $1.0178.
- The Japanese yen weakened 1.57% versus the greenback at 135.02 per dollar, while sterling was last trading at $1.2067, down 0.74% on the day.
For next week, corporate earnings reports won’t be as pronounced as the last few weeks, with most S&P 500 companies having already reported. Companies that will report in the week include AIG, BioNTech, Sysco, Wynn Resorts, Norwegian Cruise Line, Disney, and Fox Corporation, among a few others.
The latest Consumer Price Index (CPI) which is expected to provide an important update on the rate of consumer inflation, and The Producer Price Index (PPI) are expected to be announced on Wednesday and Thursday respectively.
Later on Friday, the Michigan Consumer Sentiment Index (MCSI) preliminary reading for August is expected. It is an important measure of consumer confidence, along with the release of second-quarter GDP figures out of the U.K.