An inconclusive jobs report on Friday failed to prevent a feeble end to the week for markets, where the Fitch downgrade of the US credit rating had already left its mark.
The most closely watched economic release of all, the non-farm payrolls data, showed that 187,000 jobs had been added in July, against a consensus of 200,000. Unemployment also ticked lower to 3.5% from 3.6%, but one area of concern was average hourly earnings, which came in slightly higher than expected at an annualised 4.4%, suggesting that the Federal Reserve’s battle against inflation is not yet won.
That said, the lighter employment number at the headline level could suggest a slight moderation in the labour market, an estimate which is notoriously difficult to predict given the lagged effect of interest rate rises.
The Fed has maintained that its policy will remain data dependent, with the market currently pricing in a hold decision at the next meeting in September. In the meantime, a further inflation reading on Thursday should provide an additional clue, with the core rate expected to slow to 4.7%.
Against a low bar of expectations, the results season has provided a generally upbeat set of numbers and accompanying outlook comments. An estimated 80% of corporates having beaten forecasts as the number of companies reporting begins to wind down.
Amazon.com Inc (NASDAQ:AMZN) shares surged following blow-out numbers, although Apple Inc (NASDAQ:AAPL) fell by almost 5% on its revenue and forecast figures, which had a disproportionate effect on market moves given the company’s significant weighting.
Even so, the main indices remain comfortably ahead in the year to date, with increasing hopes of an economic soft landing prevailing. The benchmark S&P500 has added 16.6%, the Nasdaq 33% and the more traditional Dow Jones 5.8%.
Asian markets were in mixed mood overnight, with Japan’s Nikkei running out of steam despite the likelihood of a continuation of the loose monetary policy which has more recently given major shares a boost. China meanwhile remains hamstrung by the ongoing lack of defined intervention by the authorities which could revive a lagging recovery. Despite an announcement that liquidity would be maintained in the banking system, the pressing issues of an ailing property sector, high youth unemployment and falling consumer sentiment remain apparently unresolved.
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The cautious waves of sentiment washed over to UK shores in early trade, where the premier index has been unable to make much headway of late despite the tailwind of weaker sterling.
After its disappointing outlook comments on Friday, further pressure was piled on WPP (LSE:WPP) in the form of several broker downgrades, while student accommodation developer UNITE Group (LSE:UTG) topped the loser board with a broker cut to its price target.
The languid opening means that the FTSE100 has added just 1.2% so far this year in striking contrast to its peers across the pond, while the FTSE250 continues to flit between small gains and losses and is currently ahead by a marginal 0.2% in the year to date.
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