Stocks rallied Friday after the US employment report handily beat expectations.
United States
Stocks rallied after July employment beat expectations. The Dow Jones industrials were up 1.0 percent and 0.6 percent on the week. The S&P gained 0.9 percent Friday and 0.4 percent for the week. The Nasdaq added 1.1 percent both for the day and week.
Employers added 255,000 jobs in July, far more than expected. Employment totals were also revised upward for May and June. Bank stocks including Bank of America and Citigroup rose on the prospect of higher interest rates and consumer companies rose as investors hoped consumers would have more money to spend. The unemployment rate was 4.9 percent for a second month. Hourly pay increased 2.6 percent from a year ago.
Priceline advanced after it posted a bigger profit than expected. Home Depot and Nike gained. Kraft Heinz increased after it reported a larger profit than expected. Bristol-Myers Squibb dropped after the company said trials for Opdivo, a lung cancer drug, didn’t meet expectations. Meanwhile, shares of Merck, which is producing a rival drug, rallied. Apple and Microsoft gained. Goldman Sachs Group and JPMorgan Chase advanced.
These data reflect observations at 4:00 PM US ET on Friday, August 5. Gold at the afternoon London fixing was down US$22.35 to US$1,340.40. Copper futures were down 0.9 percent to US$2.15. WTI spot crude was down 13 US cents to US$41.80. Dated Brent spot crude was down 2 US cents to US$44.27. The US dollar was up against all of its major counterparts including the yen, euro, pound, Swiss franc and the Canadian and Australian dollars. The Dollar Index was up 0.5 percent. The yield on US Treasury 30 year bond was up 5 basis points to 2.31 percent while the yield on the 10 year note jumped 8 basis points to 1.59 percent.
Europe
Markets here also rallied on the better than anticipated US employment report. The massive stimulus package announced by the Bank of England on Thursday also contributed to the positive mood among investors. The FTSE was up 0.8 percent, the CAC gained 1.5 percent and both the DAX and SMI added 1.4 percent. On the week, the FTSE was up 1.0 percent, the SMI gained 0.8 percent and the DAX was 0.3 percent higher. The CAC however was 0.7 percent down on the week.
On Friday, Bank of England Governor Mark Carney said in a radio interview that the Bank of England had announced a stimulus package that was appropriate to deal with the high uncertainty caused by “Brexit”. On Thursday, the BoE cut its Bank Rate by 25 basis points to 0.25 percent. The bank also expanded its quantitative easing program.
Hugo Boss jumped after its second-quarter sales beat estimates. Airline Air Berlin advanced after showing improvement in its capacity utilization rate for the vacation month of July. Allianz tumbled after its second quarter profit almost halved, hurt by claims from natural catastrophes in the property and casualty segment. In Paris, LafargeHolcim was higher after the company reaffirmed its guidance after delivering better than expected operating profit in its second quarter. In London, Bellway was higher after the homebuilder delivered an outstanding trading performance for the year ended 31 July 2016 and said it is still too early to assess the effect of the EU referendum result. Royal Bank of Scotland Group retreated after reporting a wider loss for the first half of the year, blaming on “legacy issues.”
Germany’s factory orders declined unexpectedly in June on weak foreign demand especially from the euro area. Factory orders fell 0.4 percent on the month.
Asia Pacific
Stocks were mixed Friday. Investors were focused on the US employment report that would be released after markets here closed for the week. Stocks however, were boosted by the Bank of England’s aggressive policy moves on Thursday.
The Shanghai Composite retreated both on the day (down 0.2 percent) and the week (down 0.1 percent). The Hang Seng however was up 1.4 percent and 1.2 percent for the week.
The Nikkei was virtually unchanged (down 0.44 point). The Nikkei index lost 1.9 percent during the week that was marred by a strengthening yen following the smaller than expected easing measures by the Bank of Japan and disappointment over Prime Minister Shinzo Abe’s stimulus program. Nissan Chemical Industries, Isuzu Motors and Nippon Suisan Kaisha were lower. Toyota Motor rallied after reporting quarterly profit that came well ahead of estimates. Nikon advanced after reporting a surge in first-quarter net profit.
The S&P/ASX and All Ordinaries both added 0.4 percent Friday. However, on the week, the former declined 1.2 percent and the latter, 1.0 percent. Miners Rio Tinto, BHP Billiton and Fortescue Metals Group climbed as iron ore prices remained elevated below the $US60 a ton threshold. Newcrest, Northern Star Resources, Regis Resources and Norther Star Resources advanced as gold remained on course for a second straight weekly gain. The Reserve Bank of Australia left its growth and inflation forecasts unchanged in its quarterly statement on monetary policy, but said a rate cut will create room for even stronger growth.
The Kospi added 0.9 percent amid foreign fund inflows, as oil prices recovered and the Bank of England unleased a fresh stimulus package. The index edged up just 0.1 percent for the week. The Sensex was up 1.3 percent and inched up 0.1 percent on the week. Investor sentiment was bolstered by gains in rupee and the aggressive stimulus measures unveiled by the Bank of England to prevent the UK from falling into recession after the Brexit vote.
Looking forward

Central Bank activities

August 9

India

Reserve Bank of India Monetary Policy Announcement

August 11

New Zealand

Reserve Bank of New Zealand Monetary Policy Announcement

The following indicators will be released this week…

Europe

August 8

Germany

Industrial Production (June)

August 9

Germany

Merchandise Trade (June)

UK

Industrial Production (June)

Merchandise Trade (June)

August 10

France

Industrial Production (June)

August 12

Eurozone

Gross Domestic Product (Q2 second estimate)

Industrial Production (June)

Germany

Gross Domestic Product (Q2 preliminary)

Italy

Gross Domestic Product (Q2 preliminary)

Asia/Pacific

August 8

China

Merchandise Trade (July)

August 9

China

Producer Price Index (July)

Consumer Price Index (July)

August 10

Japan

Producer Price Index (July)

Machine Orders (June)

August 12

China

Industrial Production (July)

Retail Sales (July)

Americas

August 10

United States

JOLTS (June)

August 11

United States

Initial Unemployment Claims (week ending prior Saturday)

Import/Export Price Indexes (July)

August 12

United States

Retail Sales (July)

Producer Price Index (July)

Consumer Sentiment (August preliminary)

Business Inventories (June)

Global Stock Markets

*Note — all releases are listed in local time.

Source: Fidelity

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