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Breaking financial world news from 8 july 2019.

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Breaking news

US non-farm payrolls expanded by 224,000 in June

The US non-farm payrolls increased by 224,000 in June, the US Department of Labor said on Friday, July 5. Notably, the consensus forecast called for only 160,000, with the highest forecast standing at 171,000. Robust monthly employment gains signal that the US labor market remains strong despite pressure from trade frictions. However, the reading for May was revised downward to 72,000 from 75,000. Furthermore, the report said the unemployment rate rose to 3.7% from 3.6% in May, the lowest reading since 1969, mostly due to an overall increase in the participation rate. The latter stood at 62.9% in June, up from 62.8% in the previous month. Average hourly pay climbed 0.2% m-o-m and 3.1% y-o-y, with both indicators missing expectations of 0.3% m-o-m and 3.2% y-o-y. By comparison, the readings for May stood at 0.3% m-o-m and 3.1% y-o-y. The average workweek remained unchanged at 34.4 hours. In sectoral terms, 17,000 new jobs were created in manufacturing and 21,000 in construction, while 6,000 jobs were cut in retail.

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Canadian unemployment rate climbs to 5.5% in June

Canada’s unemployment rate rose to 5.5% in June 2019 from 5.4% in May, the lowest mark since 1976, a report said on Friday, July 5. The Canadian economy lost 2,200 jobs on the month, following overall gains of 27,700 a month earlier. Notably, the consensus forecast called for a 9,900 jobs increase. In y-o-y terms, the employment rate expanded by 421,000, or 2.3%. Employment gains were reported in health care, social assistance, transportation, information, culture and recreation, while the number of jobs decreased in wholesale and retail trade.

IDC: smart cities spending to reach USD 189 bn in 2023

According to the latest IDC Worldwide Semiannual Smart Cities Spending Guide, global spending on smart cities initiatives will reach USD 189.5 bn in 2023, with the top priorities for initiatives cited as resilient energy and infrastructure projects, followed by data-driven public safety and intelligent transportation. These priority areas will account for more than half of all smart cities spending. Singapore will remain the top investor in smart cities initiatives, driven by the Virtual Singapore project. New York City will have the second largest spending total this year, followed by Tokyo and London. Beijing and Shanghai tied for the number five position. Spending in all these cities is expected to surpass the USD 1 bn mark in 2020. On a regional basis, the United States, Western Europe, and China will account for more than 70% of all smart cities spending throughout the forecast. Japan and the Middle East and Africa will experience the fastest growth in smart cities spending with CAGRs of around 21%.

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Markets

US: investor sentiment roiled by positive payrolls surprise

The day’s highlight on July 5, as is the case on every first Friday of the month, was the publication of key macro data, specifically the report from the US Department of Labor, in which non-farm payrolls took front and center stage.

Monthly payroll growth in this major sector, uninterrupted for over eight years and a half already, was projected at 160,000-170,000, while the actual increase substantially exceeded expectations, totaling 224,000. Meanwhile, the weak reading for May was revised even lower to 72,000 from 75,000. Private sector hiring totaled 191,000 in June compared to 150,000, following 83,000 (revised downward from 90,000) for the previous month. Moreover, the number of government workers rose considerably in the federal and regional levels, by 33,000, among other reason, due to hiring ahead of the 2020 US Census.

The unemployment rate edged higher to 3.7% (vs. a flat reading anticipated). To remind, the May reading stood at 3.6%, unchanged from April, representing the lowest mark since December 1969. The uptick in June was driven by an increase in working-age population, and the resumption of job hunting by some Americans as the economy appears to be on track to recovery. This is also confirmed by a rise in the participation rate, which tracks the share of workforce in the total adult population, to 62.9% from 62.8% in May. U6, an alternative gauge that takes into account those Americans who want to find full-time jobs, but are currently jobless or working part-time, increased to 7.2% from 7.1% a month earlier.

The average workweek remained unchanged at 34.4 hours, in line with the median consensus, while average hourly earnings rose 0.2% to USD 27.90, or 3.1% y-o-y, the same as the reading for May.

However, investor sentiment was marred by upbeat US payrolls. Specifically, solid improvements in the labor market could be a reason for the US Federal Reserve to postpone a key cut, which policymakers, according to their recent comments, think is warranted amid downside risks to the global economic outlook and negative effects of escalating trade tension. These concerns exerted pressure on markets the whole day. As a result, key stock indices closed slightly lower on Friday, but posted solid gains on the week, which was a shortened one due to Independence Day in the US.
In particular, the Dow Jones Industrial Average eased 0.16% to 26,922.12 on Friday, ending up 1.2% w-o-w, the S&P 500 slipped 0.18% to 2,990.41, adding 1.7% w-o-w, while the Nasdaq Composite ticked down 0.10% to 8,161.79, adding 1.9% w-o-w.

In the blue-chip universe, most names (19 out of 30) landed in the red. The list of decliners included multinational conglomerate corporation 3M (-1.7%), pharmaceutical giant Merck (-1.5%) and major medical equipment and hygiene product maker Johnson & Johnson (-1.1%). Among the outperformers, banking major Goldman Sachs Group (+0.90%), leading medical insurance services provider UnitedHealth Group (+0.73%) and sports clothing and footwear maker Nike (+0.72%) stood out.

Germany’s troubled lender Deutsche Bank rose 2.8% after announcing that CIB head Garth Ritchie will step down.

Real estate investment fund NorthStar Realty Europe advanced 2.7% after accepting a takeover bid from AXA Investment Managers.
The world’s largest online retailer Amazon.com added 0.2% as it partner Deliveroo announced a plan to expand food delivery operations in the UK.

Gold mining companies tracked gold prices lower. Newmont Mining, the only gold mining name on the S&P 500 Index, shed 0.9%, while the world’s largest industry player Barrick Gold gave up 0.5%.
Mining giant Rio Tinto Group plunged 5.2% as China Securities Journal reported that Chinese regulators launched a probe into the recent rally in iron ore.

August gold futures edged down USD 20.80, or 1.50%, to USD 1,400.10/oz on the COMEX.

Gold prices decreased as the dollar appreciated against a basket global currencies, mostly on the back of gains vs. the Swiss franc and the Japanese yen. As a result, gold prices fell 1.0% on the week. August NYMEX WTI advanced 17 cents, or 0.3%, to USD 57.51/bbl. Oil prices rose following positive US jobs report, giving reason to expect higher energy demand. However, crude futures retreated 1.6% on the week, snapping a two-week winning streak.

S&P 500

From a technical standpoint, a rising wedge continues to shape up on the S&P 500, with a breakout to the downside expected before long, while the Slow Stochastic Oscillator is on the buy side at this point, but already hovering in overbought territory. Consequently, the benchmark will likely complete the uptrend in the short term.

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Europe: investor sentiment spoiled by macro data

Key European stock indices turned in negative performance on Friday, July 5, on the heels of macro data out of Germany. Specifically, factory orders decreased 2.2% in May vs. -0.1% projected after +0.4% (revised) in the previous month.
Adding to overall bearishness, expectations for US monetary policy easing weakened following the strong jobs report. Before the release, most traders had priced in a Fed funds rate cut at the FOMC’s July meeting.

Recapping the benchmarks, the UK’s FTSE 100 retreated 0.66%, the French CAC 40 slipped 0.48%, and the German DAX eased 0.49%. The regional indicator STXE 600 closed 0.72% lower at 390.11.
German lender Deutsche Bank rose 2.5% after announcing that CIB head Garth Ritchie will step down as part of a business restructuring plan, with CEO Christian Sewing to take over that position.

German lighting equipment maker Osram Licht added 2.2% on reports that it accepted a EUR 3.4 bn takeover bid from US investment firms Bain Capital and Carlyle Group.
Swedish tech player Hexagon tanked 13% after guiding for lower Q2 sales, citing the US-China trade dispute.
British construction materials supplier SIG plunged 5.3% after reporting a 5.3% decrease in like-for-like sales.

Key European stock indices have been showing mostly negative performance during the first half of Monday, July 8, under pressure from expectations that the US Federal Reserve may postpone a rate cut following Friday’s strong jobs report.
Adding to downbeat sentiment, the Eurozone Sentix Investor Confidence Index for July came in at -5.8, missing -0.1 expected, after -3.3 in June.
Moreover, investors await the release of minutes from the FOMC and ECB meetings due out on Wednesday and Thursday, respectively.
By 8:41 GMT, the UK’s FTSE 100 ticked up 0.05%, the German DAX eased 0.06%, and the French CAC 40 gave up 0.07%. The regional barometer STXE 600 was up 0.05% at 390.32.

Asia: benchmarks trend lower

Asian stock indices turned in negative performance on Monday, July 8 as traders scaled back their expectations for an aggressive Fed funds rate cut at the FOMC’s July meeting, following a robust US jobs report for June.
As regards regional macro statistics, Japan’s machinery orders dropped 7.8% m-o-m vs. -4.7% m-o-m expected. In y-o-y terms, the indicator decreased 3.7% compared to -3.9% projected. Furthermore, the country’s bank lending expanded 2.3% y-o-y in June.
The Japanese Nikkei 225 retreated 0.98%, the Chinese Shanghai Composite fell 2.58%, Hong Kong’s Hang Seng pulled back 1.54%, the South Korean KOSPI slid 2.20%, and the Australian S&P/ASX 200 closed 1.17% lower.
On the S&P/ASX 200, Speedcast International and Costa Group Holdings outperformed the broader market, surging 6.39% and 3.18%, respectively. Among the decliners, G8 Education and Eclipx Group sank 9.77% and 4.84%.
The Nikkei 225 gainers were led by Chiyoda and J.Front Retailing, which added 3.38% and 0.79%, respectively. On the downside, Sumitomo Dainippon Pharma and Aeon gave up 5.18% and 4.71%.
Japanese financial equities were well bid on the back of higher US government bond yields. In particular, Mizuho Financial Group and Dai-ichi Life Holdings picked up over 0.2%.
Japanese heavyweights Fanuc and Komatsu shed 0.8% as they traded ex-dividend.
In the Australian banking sector, Commonwealth Bank, National Bank of Australia, Australia & New Zealand Banking and Westpac landed in negative territory.
Australian mining giant Rio Tinto slipped over 0.98%.
In South Korea, Samsung Electronics and SK Hynix declined over 2%.

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Breaking financial world news from 8 july 2019.

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