US unemployment to 1969 low

Nonfarm payrolls soared to 528K last Friday. This is more than double the 250k jobs economists expected, bringing unemployment back to pre-pandemic levels.

Unemployment came down to 3.5%, a rate not seen since 1969.

The figures beat estimates but increased fears the Fed is not done with hiking aggressively.

Key factors for Today

● NFP surges to pre-pandemic employment levels, unemployment to 1969 low
● Gold plummets over 1.50% after jobs report increases Fed’s hiking bets
● Oil prices back to pre-invasion levels on easing recession risks
● UK’s housing market takes a bad turn
● Tesla’s splits time badly this time
● World’s best investor reports huge loss

Dollar soars 2% against yen on upbeat NFP

USD/JPY traded more than 2% above its Friday low and is set to continue its acceleration as bets the Fed will hike 75bps in September have risen.
Aside from employment surging and unemployment improving, wage growth jumped to 5.2% y/y. This implies the Fed will have to fight inflation on many fronts now, which adds to fears of an impending recession.
Looking further out, risinginflation during an economic slowdown and combined with a flat participation rate is a bad recipe. However, markets seemed too quick to discount that expectation in the short-term.
US indices closed mainly bearish, with the DJIA being an exemption as it rose 0.25%. DJIA includes major defensive stocks.

Gold plunges 1.70% on strong US economic data

The price of gold erased some of its recent gains on Friday after falling to $1765/oz following the NFP report. It was previously seen trading at 1796/oz. Gold had been supported by Fed’s recent dovishness, but the employment report has eased fears of recession, and most FOMC members have turned hawkish.

Of note has also been that some of the Fed’s most-known ‘doves’ turned to ‘hawks’, in a bid to fight stubbornly rising inflation. Fed’s Bowman was the last to yield a 75bps in September. She is not known as a dove per se, but she has a similar stance to JP, which makes the turn a bit more hawkish.

WTI posts biggest weekly decline in 4 months

Less fuel demand as indicated by a surprise jump in US crude inventories has contributed to lower crude prices, completing the biggest weekly decline in four months and slipping below the $90/bbl level. US Backer Huges rig count also fell for the first time in five weeks.

UK’s House Price Index down first time since pandemic

UK home prices were down for the first time in the post-pandemic era as mortgage rates rise with interest rates and amid fears of an economic downturn. HHI fell from 12.5% to 11.8%. This follows BOE governor Andrew Bailey’s warning of a long recession last Thursday. Annual prices were still higher but at a much slower rate. The data has no notable impact on FTSE but will be one to watch for homebuilding shares.
Leading Tory candidate (and therefore presumed next PM) Liz Truss hinted at reviewing the BOE regime, but Bailey affirmed his intention to stay on for his full term.

Tesla down more than 6% after stock split

Tesla shares fell 6.6% on the day after agreeing to a stock split. The split was seen as potentially attracting new investors as it did in the past. But the outsized jobs report is expected to keep the Fed on course to tighten and tech stock prices have been under pressure while that’s the case.

Berkshire Hathaway in $53bn loss

Warren Buffets company reported a $53 loss, due to a lower valuation of stock prices in its portfolio. Available cash balance also dropped but had better returns on insurance premiums.

Market movers

● Constellation Energy printed a +10% following better earnings, and analyst upgrades.
● Atlsassian soars 16% after revenue beat, and forecast raise NortonLifeLock plunged 9.9% after poor earnings
● Softbank expected to drop on biggest quarterly loss ever

What’s on schedule

● Nonfarm productivity expected to improve to -4.6
● API crude stocks could add pressure on oil