What’s happening in markets?
US equities (US500.I and USNAS100.I): Apple weighs on the indices
US equity markets closed lower on Friday despite a mixed NFP report providing little signal on what may be coming at the next Fed meeting. All three major indices closed lower as Apple’s earnings disappointment weighed on sentiment and index performance. Apple was down 4.8% on slowing iPhone sales, and could not be offset by 8.3% gain in Amazon because of Apple’s higher weight in the indices. This week’s focus will mainly be on Wednesday’s CPI release along with more Q2 earnings from Sony, Palantir, Rivian, Alibaba.
Hong Kong & Chinese equities (HK50.I & 02846:xhkg): Sentiment supported on support measures
HK stocks closed higher by 0.6% while CSI300 rose 0.4% on Friday amid commitment from China’s central bank to boost funding support for private firms and meet developers’ financing needs. The meeting on Friday continued to signal that PBoC remains committed to bolster investor confidence with key focus on property and consumer.
FX: Dollar slips as July NFP lacks conviction for another Fed rate hike
The US dollar slid on Friday amid a headline miss in July NFP, even as the details of the report had some hawkish elements. Treasuries gained on Friday after a sell-off earlier in the week and underpinned a softer dollar. Lower Treasury yields also helped the Japanese yen, USDJPY slid below 142 from highs of 143.89 last week. EURUSD gained to 1.1042 but focus returned to 1.10 in early Asian hours today. GBPUSD had a more modest reaction to USD selloff, trading near 1.2750 with BOE’s dovish turn last week underpinning. AUDUSD also unable to sustain gains above 0.66.
Crude oil: sixth consecutive week of gains
The supply tightness concerns continued to underpin the crude oil market which saw a sixth consecutive weeks of gains last week amid announcements of deeper cuts from Saudi Arabia and Russia and sharp declines in inventory. WTI crude prices rose 1.5% while Brent rose 1.3% despite a mixed NFP report.
What to consider?
Mixed US NFP jobs report to continue the goldilocks
Headline jobs added came in at 187k in July, missing the 200k estimate and coming in just above last month’s 185k which was revised lower from 209k. Private payrolls jumped to 172k from 128k, while government payrolls were responsible for a much smaller 15k jobs in July vs the high 57k in June. Elsewhere, the unemployment rate moved lower to 3.5% from 3.6% and the average hourly earnings were hot as well, rising 0.4% M/M (exp. 0.3%, prev., 0.4%), with the Y/Y rising 4.4% (exp. 4.2%, prev. 4.4%), although one also has to consider the average hours worked falling to 34.3 in July, back to the joint-lowest post-COVID. Such a report keeps the market reluctant to price in another Fed rate hike, but a host more data is due ahead of the next meeting, importantly the CPI due this week.
Some Fed members still leaning hawkish
Some hawkish comments from Fed member Michelle Bowman were heard over the weekend. She warned more rate hikes "will likely be needed," a contrast with other Fed officials advocating wait-and-see. The governor is "looking for consistent evidence" that inflation continues to moderate. Raphael Bostic and Austan Goolsbee said after Friday's slower job growth data that the labor market is becoming better balanced, so the FOMC can afford to be patient.
Maersk warns of global trade downturn
Danish shipping and logistics group A.P. Moller-Maersk A/S, the world's largest owner of container ships and one of the best bellwethers for global trade, warned of a “longer and deeper” contraction in global trade. Maersk now sees global container volume growth in the range of -4% to -1% compared to -2.5% to +0.5% previously.
Global food prices jumped higher in July
Global food prices increased the most in 1.5 years as trade disruptions from the El Nino weather phenomenon battered agricultural-producing countries, and Russia's exit from a crucial UN-backed agriculture deal stoked supply concerns. The Food and Agriculture Organization of the United Nations (FAO) reported Friday that the global food index, which tracks monthly changes in the international prices of globally-traded food commodities, averaged 123.9 in July, up 1.3% from the previous month. This was the largest monthly gain since March 2022.
Highest H1 gold demand from central banks on record
Central banks around the world added a record amount of gold to their reserves through the first half of 2023. Net central bank gold purchases totalled 387 tons through the first half of the year, according to data compiled by the World Gold Council. That was the highest first-half total since the organization started compiling quarterly data in 2000. China’s PBoC was the biggest buyer, followed by Singapore’s MAS, while Turkey turned to be a net seller in Q2 due to local market dynamics.
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