Wed. Aug 10th, 2022

Charlie Ripley, senior investment strategist for Allianz Investment Management, said: “The script did not play out as expected … But looking behind curtains shows the details of tighter working conditions than the headline data suggest.”

Ripley also said the report “in the end” should not get the Fed to move forward with downsizing the bond program in the coming months.

Oanda’s Edward Moya said the report “further cements” the Fed’s view that downsizing does not start the countdown to interest rate hikes. “If next month’s report also has a similarly slow recruitment rate, Wall Street may become more skeptical of any rate hikes at the end of next year.”

Iron ore jumped more than 5 percent to more than $ US120 a tonne on Friday, according to Fastmarkets MB, as Chinese markets returned from a week of national holidays.

In a note, CBAs Vivek Dhar said he sees prices tracing back to around $ 100 per barrel. Ton as Chinese steel production cuts gather momentum in the coming weeks.

As for 2022, Dhar said the price outlook “is more uncertain”; he expects prices to be subdued through the 2022 quarter, then perhaps recover in the June quarter and then lose ground in the second half.

U.S. earnings in the third quarter will accelerate this week, with major banks first out of rank. JPMorgan reports early Thursday (AEDT).

Today’s agenda

No local data. NAB’s monthly business survey on Tuesday and Thursday’s job report are the highlights.

Overseas data: British industrial production August. China’s trade data will be released on Wednesday and price reports on Thursday.

* The annual autumn meetings of the IMF and World Bank Group boards, as well as the G7 and G20 meetings between finance ministers and central bank governors, will be held in Washington from 12-15. October

Market highlights

ASX futures lower 4 points or 0.05 percent to 7273

  • AUD -0.04% to 73.09 US cents
  • Bitcoin on bitstamp.net $ US pr. .. is AEDT
  • On Wall St: Dow -0.03% S&P 500 -0.2% Nasdaq -0.5%
  • In New York: BHP + 1.1% Rio + 0.5% Atlassian -0.6%
  • In Europe: Stoxx 50 -0.6% FTSE + 0.3% CAC -0.6% DAX -0.3%
  • Spot gold + 0.1% to $ 1757.13 / oz in New York
  • Brent crude oil + 0.5% to $ 82.39 US $ per. Barrel
  • US oil + 1.3% to $ 79.35 a barrel
  • Iron ore + 5.4% to $ 123.38 per. Ton
  • 2-year dividend: US 0.32% Australia 0.08%
  • 5-year dividend: US 1.06% Australia 0.92%
  • 10 -year dividend: USA 1.61% Australia 1.63% Germany -0.15%

From today’s financial review

Stagflation fears stalk markets While most strategists are reluctant to call the beginning of an era of stagflation, many are beginning to recognize that the energy crisis may trigger fears of its return.

End of WFH: NSW vaccinated allowed back to office Unpublished changes to the NSW roadmap mean some unvaccinated workers who had endured the jab could return to work on Monday, while fully vaccinated workers can return to the office.

Andrews allows 10,000 to attend Melbourne Cup to mark reopening The Andrews government will allow the race carnival to host a crowd of thousands when the state hits 70 per cent vaccination before visitors can enter homes.

International travel may return this month Australia’s international border could reopen within weeks, if not days, as NSW quickly tracks its home quarantine system, Prime Minister Scott Morrison said.

United States

The U.S. adds 194,000 jobs in September to this year’s smallest gain: Unemployment fell to 4.8 percent, partly reflecting a decline in labor force participation among women.

Mohamed El-Erian: Noisy job report sends mainly competing signals: One explanation for the miss in September is that the data points to a malfunctioning US labor market.

Top 1pc of U.S. wage earners possess more wealth than anyone in the middle class: The middle 60 percent of U.S. households by income saw their total assets fall to 26.6 percent of national wealth from June.

Apple on Friday asked a U.S. federal judge to suspend orders that may require it to change some of its App Store practices, saying it also appeals the verdict in a cartel case brought by “Fortnite” creator Epic Games , according to court archives.

The third-quarter U.S. earnings season begins in earnest this week with the big banks. Analysts expect on average S&P 500 earnings per. Shares for the quarter to rise nearly 30 percent, according to Refinitiv.

Factsets John Butters said that on the basis of the earliest reports, he predicts that companies will tip the negative effect of supply chain problems.

Goldman said while earnings reports will highlight input cost pressures, highest inflation in the coming months would reassure investors and help lift S&P 500 to 4700 at the end of the year. That translates into a 7 percent rally from Friday’s closing.

Europe

European equities ended a volatile session lower on Friday, but they still marked their best week in two months as fears of rising inflation subsided.

The Stoxx Europe 600 index ended 0.3 percent lower, pairing the week’s rebound to 1 percent.

Bulls are still optimistic. “We expect European stock markets to recover and end the year higher as the market shifts focus from macro issues, such as high energy prices and discussion around the US debt ceiling, back to micro and corporate profitability,” said Nick Nelson, head of global and European stock strategy at UBS Group.

“We see it as no coincidence that the current market withdrawal occurred between reporting seasons,” Nelson also said.

Oil and car stocks led gains in Europe on Friday, but this was offset by tech stocks falling 1.4 percent as rising bond yields dampened the high-growth sector’s appeal.

Travel stocks in the UK, including British-Airways owner IAG, Whitbread and Ryanair, achieved between 0.4 per cent and 1.6 per cent, with the UK scrapping tough COVID-19 quarantine requirements for 47 destinations.

The Czech trucking company Eurowag fell 10 percent in its London market debut after hovering a day late and at a reduced price.

Asia

China’s shares closed higher on Friday after a week-long national holiday, helped boost data to the service sector and ease political tensions with the United States.

The blue-chip CSI300 index rose 1.3 percent to 4929.94, while the Shanghai Composite Index gained 0.7 percent to 3592.17 points.

Still pulled property and coal.

Chinese real estate developers’ bonds and stocks fell on Friday with little trace of how local regulators are proposing to curb contagion from cash-strapped China Evergrande Group, which faces nearly US $ 150 million in offshore payment commitments this week.

The coal sub-index fell 4.1 percent after China’s top coal region asked mines to increase production immediately, the authorities’ latest attempt to increase coal supply amid record prices and shortages of electricity.

In Hong Kong, the Hang Seng Index rose to 24,837.85, while the China Enterprises Index rose 0.7 percent to 8,775.65.

Information technology sub-index rose 2.2 per cent. Index heavyweight Alibaba Group jumped 5.6 percent, the biggest daily winner on the city benchmark.

Internet giants Tencent Holdings and Meituan added more than 2 percent each.

Currencies

TD Securities’ view of the foreign exchange market: “We continue to believe that the fall in the USD will be low, especially in relation to the financing currencies. Despite a headline shortfall in U.S. wages, the USD has been able to bounce back; in the end, we believe the Fed is required to announce conical next month.

“We believe that the focus on the data will remain, with particular interest in the forthcoming CPI report. Note, however, that the next two weeks are a period that has typically experienced seasonal weakness in the USD since the JRC. However, this is probably superficial. We continue to look for gains in cross / CAD, with EURCAD on the other side of the path of least resistance. ”

Capital Economics’ said that the job report in September only changed the perception that US interest rates are ready to rise higher by 2023. “The employment report showed signs of worsening labor shortages, which only adds to our perception that high inflation will be more persistent than expected currently.

“Markets do not appear to be worried about future inflation over the next few years, and the implicit Fed fund rate is currently significantly below the Fed’s own long-term estimates,” it added.

“This suggests that there is a possibility that investors may increase their expectations of the key policy rate, demand more compensation for future inflation or a combination of the two.”

Capital Economics sees US 10-year dividends rise to 2.5 percent by the end of 2023.

Raw materials

‘Patience can run dry’: Mongolia warns Rio Tinto about copper mine: In a burning letter, Mongolia has revised the stand-off with Rio Tinto over delays and costs of blowout in Oyu Tolgoi and demanded that Rio pick up the flag.

Goldman sees more room for prices to run: “Commodities, especially energy-related ones, have been the best performing YTD supported by the reopening of COVID-19 and growing shortages across physical markets.

“Despite the strong rally, we remain the OW asset class in our asset allocation, and with investors increasingly concerned about stagflation risks, we believe the role of commodities in multi-asset portfolios will become more important by the end of the year.”

Goldman said its strategists are particularly bullish on energy and aluminum, and that they have upgraded their end-of-year targets for Brent oil by $ 10 to $ 90 per tonne. Barrel.

Looking at copper, Goldman said it is fast becoming the most wrong commodity because investors forget that even though macro risks are real, red metal is a real asset.

“This mispricing is centered around rapidly tightening inventories – now it is drawing at the fastest rate ever and has fallen by almost 40 percent over the last 4 months. With a significant metal deficit estimated for the 4th quarter, global visible copper stocks could reach all-time lows by the end of the year and lack of market adjustments driven by higher prices, completely depleted in the 2nd-22nd. ”

Goldman said it is still “strongly doomed in our copper call, with a year-end target of $ 10,500 dollars per tonne”.

Benchmark copper on the London Metal Exchange had risen 0.8 per cent. For $ 9355.50 USD per. Tons at 1600 GMT Friday in London.

Australian stock market

Energy crisis supports ASX rebound: The Australian stock market reversed its four-week decline on Friday with a strong performance from the energy sector amid a global shortage driving gains.

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