Spreadex Market Update
Mixed messages from US jobs report, and China return on Monday, inspires widespread losses
Whilst the headline figure, a non-farm payroll of 173k against the 215k expected, is at a glance a dovish number, the entire afternoon seems to have conspired against investors getting a clearer picture of whether a September rate-hike is on the cards or not. Though the non-farm missed expectations, 1) there is a tendency for the August figure to be revised upwards in subsequent readings and 2) both June and July were themselves revised upwards, the former from 223k to 231k and the latter a big jump from 215k to 245k.
There was then the better-than-expected 5.1% unemployment rate, the lowest it has been since April 2008, as well as 0.3% wage growth against the 0.2% forecast. The cherry on top actually came before the jobs figures were announced, with the FOMC’s resident super-hawk Jeffrey Lacker arguing that a) the Fed has a history of overreacting to the financial markets, that b) the ‘real’ side of the economy points to a need for higher interest rates and, in what turns out to have been a pre-emptive comment, that c) even if August’s non-farm underperforms (as it did) that it shouldn’t derail a September lift-off.
Whilst this bombardment of information doesn’t really clear anything up, the markets appear to have taken it one way, and one way only. The non-farm figures caused the already hefty gains in Europe to accelerate, with the FTSE falling over 2% and the DAX and CAC both near a whopping 3% drop. The Dow Jones, meanwhile, shed over 250 points at the open, with investors seemingly taking the afternoon’s events as more hawkish than they would have liked.
Of course, there is another reason why investors might not be too keen on taking any risk into the weekend. The Chinese stock market returns on Monday, likely without the helping hand of the government to lift it from its more dire declines. It isn’t clear at the moment how the Shanghai Composite is going to open next week, and that uncertainty combined with the spectre of some potentially brutal losses, is exacerbating Friday’s market-wide collapse.
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