Breaking financial news

Breaking financial world news from 9 september, 2019.

Breaking news

US unemployment remains at 3.7%

The US economy added 130,000 new jobs in August, data from the US Department of Labor showed. Notably, analysts, on average, projected an increase of 160,000. The estimates for June and July were downwardly revised by 20,000 in total. It should be noted that the August data includes 25,000 temporary government workers hired to conduct the 2020 census. The US unemployment rate was unchanged in August at 3.7%, matching the consensus forecast. The number of private sector jobs rose by 96,000, and the number of government workers expanded by 34,000. The manufacturing sector reported an increase of 3,000, while the retail sector saw a decrease of 11,000 jobs. Construction saw gains of 14,000 jobs, business services added 37,000 jobs, education and healthcare boosted employment by 32,000 jobs, while financial services added 15,000 jobs. Average hourly wage picked up 0.4% m-o-m and 3.2% y-o-y to USD 28.11. The average workweek reached 34.4 hours compared to 34.3 hours a month earlier. The participation rate stood at 63.2% in July, up from 63% in the previous month. A worse-than-expected US payrolls report strengthens the case for a rate cut at the FOMC’s September meeting, analysts believe.

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China exports unexpectedly drop in August

China’s exports fell 1% y-o-y to USD 214.8 bn in August, the country’s General Administration of Customs (GAC) reported. Meanwhile, imports declined by 5.6% to USD 179.97 bn, while analysts on average forecast exports to rise 2% and imports to decrease 6%. China’s trade surplus amounted to USD 34.83 bn in August vs. USD 43 bn in July. China’s trade surplus with the United States decreased from USD 27.97 bn in July to USD 26.95 bn in August. China’s exports to the US declined by 16%, while US exports to China slid by 22.4%. Moreover, in August China cut exports to Australia (-17%) but raised shipments to the EU (+3.2%), Japan (+1.4%), South Korea (+1.9%) and Taiwan (+24.6%). EU shipments to China declined by 5.2%, those from Japan decreased by 8.8%, South Korea’s supplies plunged by 17.6%, Taiwanese exports fell 1.4%, while Australia’s exports to China soared 32.2%.

Powell: Fed does not expect any recession stateside

The Federal Reserve does not expect a recession in the US economy, Fed Chair Jerome Powell said. According to him, the Fed thinks that the most likely scenario for the US economy is continued moderate growth. Based on the regulator’s estimates, GDP will grow 2-2.5% in 2019. The central banker thinks that the US economy has delivered strong results and is in good shape. Among major risks for US economic growth Powell mentioned a global economic slowdown, trade uncertainties and weak inflation. “We’re going to continue to watch all of these factors, and all the geopolitical things that are happening, and we’re going to continue to act as appropriate to sustain this expansion,” Powell said. “Our main expectation is not at all that there will be a recession” either in the U.S. or the global economy,” he added. He also claimed that the global macroeconomic landscape has changed. Now the pace of economic growth will be slower than before, inflation will slow down and interest rates will be lower. For this reason, central banks will see fewer possibilities to support their economies in case of a recession, and this is the biggest challenge for them.

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Markets

US: employment data could urge the Fed to cut rates

US equity and commodity markets closely watched on Friday, September 6, a set of detailed data on the US labor market from the Department of Labor for the past month in which non-farm payrolls were in focus. Aside from the key numbers, there was special interest as these indicators came out ahead of the next FOMC meeting in mid-September and could have an impact on the regulator’s strategic monetary policy decisions.

Monthly gains in non-farm payrolls, a trend which has persisted for nine years, were estimated at 160,000170,000 in August, while the actual number missed the median forecast, totaling 130,000. On top of this, earlier readings were revised downward. As a result, aggregate job gains dropped by 20,000 in July and June. In August, private businesses hired 96,000 vs. 150,000 expected and after the reading in the previous month was revised down from 148,000 to 131,000. In line with a trend which has shaped up in recent months, the government again raised hiring of federal and regional civil servants substantially (+34,000) partially due to the gradual hiring of temporary employees for the 2020 Census.

The US unemployment rate expectedly remained unchanged at 3.7% (although a higher increase in job growth was anticipated). U6, an alternative unemployment gauge which takes into account people who have stopped looking for a job or are forced to work part-time, rose from 7% in July to 7.2%. The Labor Force Participation Rate, which measures the weight of working age people in the total population, increased from 63% in July to 63.2% in August.

In line with the forecast, the average workweek rose from 34.3 in July to 34.4 hours, a sign of upcoming economic expansion. Average hourly earnings jumped 0.4% to USD 28.11, up 3.2% m-o-m but less than in the prior month’s final reading of 3.3%.

The Department of Labor’s jobs report, after favorable hiring data from the private sector released on Thursday, according to the ADP, this time did not disappoint investors much. The report solidified investor hopes that FOMC officials who regard labor market conditions and inflation as key indicators are more likely to reduce the target range for the federal funds rate at the upcoming meeting in mid-September. The possibility of this scenario was recently mentioned by several high-ranking Fed officials who also took into consideration high economic risks for the country due to escalation in trade disputes with China and other major partners, and overall challenges faced by the global economy.

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However, investors were quite cautious and no pronounced trend emerged during the session. The trio of benchmarks closed with only minor fluctuations on the day, but showed strong gains at the end of the Labor Day-shortened trading week.

Recapping the indices, the Dow Jones Industrial Average advanced 0.26% to 26,797.46, up 1.5% w-o-w, the S&P 500 ticked up 0.09% to 2,978.71, for a weekly advance of 1.8%, and the Nasdaq Composite closed 0.17% higher at 8,103.07, up 1.8% on the week.

In the blue-chip universe, most liquid names (20 out of 30) closed in the green, with the gains led by flagship microchip maker Intel (+1.6%), the world’s leading home improvement retailer Home Depot (+1.3%) and energy giant ExxonMobil (+0.9%). The underperformers included software leader Microsoft (-0.7%), retail king Walmart (-0.6%), and leading US credit card operator American Express (-0.4%).

Among the top outperformers, athletic apparel producer Zumiez spiked 11.3% on robust quarterly financial results that considerably outperformed the median consensus.

Another athletic clothing retailer, Lululemon Athletica, soared 7.8% as 2Q earnings beat the median consensus and the company raised FY sales guidance.

The world’s biggest social network Facebook retreated 1.8% as the Democratic attorney general of New York announced that attorneys general in eight states had begun an anti-trust investigation of the network.

Science Applications International, an IT firm which deals with US defense and investigation agencies, tanked 8.1% as revenue in the past quarter missed the median consensus.

Cloud corporate software developer Domo crashed 37.5% after warning investors that it could incur much higher full-year operating losses compared to the previous estimate.

In commodities, December COMEX gold fell USD 10.00, or 0.7%, to USD 1,515.50/oz.

Gold’s investment appeal as a safe haven asset decreased after Fed Chair Jerome Powell delivered a speech at a conference in Zurich. He claimed that the Fed sees no prerequisites for a recession in the US economy. WoW, the precious metal fell 0.9.

October NYMEX WTI traded up 22 cents, or 0.4%, to settle at USD 56.52/bbl.

Crude gained on the heels of a third straight weekly contraction in the US rig count, according to oilfield services provider Baker Hughes. Oil advanced 2.6% against last Friday’s close.

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S&P 500

From a technical standpoint, the daily chart shows that the S&P 500 continues to trade within a rising wedge, with the upper bound at 3,060 and the lower line at 2,880. Meanwhile, the 2,727 mark is still a key support level. Stochastic lines are on the buy side but have already reached overbought territory, so we expect the index to halt its ascent.

Breaking financial world news from 9 september, 2019.

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Europe: most benchmarks end Friday higher

Key European stock indices turned in mostly positive performance on Friday, September 6 as investors were heartened by the Chinese government’s pledge to boost lending as well as expectations for a new round of the US-China trade negotiations. However, any further upside was capped by a worse-than expected US nonfarm payrolls report for August.

As regards other macro data, the Eurozone Q2 GDP (revised) increased 0.2% q-o-q and 1.2 y-o-y vs. expectations of 0.2% q-o-q and 1.1% y-o-y. In Germany, factory orders fell 0.6% m-o-m in July, while analysts, on average, projected +0.3% m-o-m.

Recapping the benchmarks, the French CAC 40 firmed 0.19%, the UK’s FTSE 100 Index added 0.15%, and the German DAX advanced 0.54%. The regional indicator STXE 600 closed 0.32% higher at 387.14.

German steelmaking giant Thyssenkrupp spiked 5.0% on news that Finland’s Kone is looking to team up with a private equity partner to bid for Thyssenkrupp’s elevator business.

British security services provider G4S soared 6.5% on media reports that US-based Brinks plans to make a bid to take over some of the former’s assets.

Norwegian telecom player Telenor plunged 3.4% after saying that it plans to create a JV with Malaysia’s Axiata Group.

French catering services provider Sodexo shed 2.7% as equity analysts at Barclays downgraded to the stock to Underweight.

European bourses have been showing mixed dynamics during the first half of trading on Monday, September 9 as investors are focused on a string of regional macro data and corporate news. Moreover, traders are looking ahead to the ECB policy meeting scheduled for later this week.

As regards macro data, the Eurozone Sentix Investor Confidence Index for September came in at -11.1 compared to -14.0 projected, following -13.7 in August. In the UK, the industrial output was up 0.1% m-o-m and down 0.9% y-o-y vs. expectations of -0.1% m-o-m and -1.1% y-o-y.

By 9:04 GMT, the French CAC 40 eased 0.10%, the UK’s FTSE 100 edged down 0.06%, while the German DAX added 0.19%. The regional indicator STXE 600 was off 0.04% at 387.0.

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DAX

The German DAX is still locked within a rising band, with the upper line at 12,950 and the lower line at 11,400. Meanwhile, the closest resistance level is still 12,665. Stochastic lines are buy-friendly and in overbought territory, so we expect the upward movement to lose momentum for the time being.

Breaking financial world news from 9 september, 2019.

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Asia: equities remain on upward track

Asian stock indices extended an upward trend on Monday, September 9. To remind, the People’s Bank of China cut the reserve requirement ratio for banks by 0.5%, paving the way for a CNY 900 bn liquidity release.

As regards market-driving data, Japan’s Q2 GDP (final) expanded 0.3% q-o-q, in line with the consensus forecast. In y-o-y terms, growth stood at 1.3%. In New Zealand, Q2 factory sales decreased 2.7%.

In China, the trade surplus for August totaled USD 34.84 bn compared to USD 44.61 bn in the previous month, while analysts, on average, expected USD 43.0 bn. Furthermore, the country’s exports decreased

1% y-o-y vs. +2% y-o-y projected, while imports declined 5.6% y-o-y vs. -6.0% y-o-y. US imports to China fell 22% y-o-y to USD 10.3 bn, and Chinese exports to the US contracted 16% y-o-y, to USD 44.4 bn.

The Japanese Nikkei 225 advanced 0.56%, the Chinese Shanghai Composite rose 0.84%, Hong Kong’s Hang Seng edged down 0.04%, the South Korean KOSPI firmed 0.52%, and the Australian S&P/ASX 200 closed fractionally higher.

The S&P/ASX 200 standout advancers included Orocobre and TPG Telecom, which surged 5.55% and 5.45%, respectively. On the other side of the spectrum, Regis Resources and Speedcast Inernational plunged 6.97% and 5.18%.

The Nikkei 225 gainers were led by Rakuten and Taisei, which climbed 4.17% and 3.45%, respectively. Among the notable decliners, Alps Electric and NEC shed 1.9% and 1.84%, respectively.

In Japan, banking stocks enjoyed demand, with Tsukuba Bank and Fukushima Bank rising over 2%.

Local heavyweights NTT Docomo and FamilyMart were also well bid, adding over 1.5%.

In Australia, mining giant Rio Tinto closed 0.07% lower, while oil company Beach Energy gave up 1.20%.

In the Australian banking sector, Westpac, National Bank of Australia, Australia & New Zealand Banking and Commonwealth Bank ended in the green.

In Hong Kong, PetroChina and Sunny Optical outperformed, advancing 3.76% and 1.03%, respectively.

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Hang Seng

From a technical standpoint, the Hang Seng is extending its ascent towards the resistance level at 27,000.
Breaking financial world news from 9 september, 2019.

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Commodity markets

Oil has extended gains on Monday. Investors continue to digest news that Saudi Arabia replaced its energy minister. The media wired over the weekend that the king of Saudi Arabia dismissed energy minister Khalid Al-Falih and appointed to this position one of his sons, Prince AbdulAziz bin Salman who was a member of the Saudi Arabian delegation to the OPEC for a long time and has sufficient experience in the oil industry. Some experts believe that Al-Falih’s dismissal could be attributable to his failure to secure oil prices that Riyadh seeks since 2016. Perhaps the new minister will act to reduce oil supplies at a much faster pace. OPEC Secretary General Mohammad Barkindo said that Saudi Arabian officials have already confirmed that the kingdom will remain committed to the terms of the OPEC+ deal.

Oil drew some support from the Baker Hughes rig count, according to which the number of active drilling rigs declined by 4 units to 738 last week, extending the trend to three weeks.

Non-ferrous metals are seeing mixed trading on the LME, while gold is hovering within a narrow range of USD 1,510-1,520/oz after falling sharply in the previous sessions.

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Breaking financial world news from 9 september, 2019.

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