Weekly Market Wrap 02-Aug to 06-Aug 2021

Marius Paun | London, UK | Senior dealer |Friday 06th August 2021

The US Economy Added 943,000 Jobs In July With Unemployment Rate At 5.4%

The US earnings season continued to push stocks higher this week with major indices S&P and Nasdaq both closing at fresh all-time records yesterday. The non-farm payrolls report released today showed the economy added back 943,000 jobs in July vs +865,000 expected and a revised 938,000 in June. At the same time, the unemployment rate came in at 5.4% vs 5.7% estimated and 5.9% in June.

Note that a third of total jobs gains in July were once again leisure and hospitality sectors which added 380,000 payrolls. In the private sector, education and health were notable contributors adding nearly 90,000 jobs. It seems that a US vote on the $1 trillion infrastructure bill might also be on the cards in the next few days. The Senate Majority Leader Chuck Schumer seemed optimistic the infrastructure bill ‘will be done by August recess’ which is this Sunday – August 8th.

China’s Caixin service PMI for July was also out this week coming in at 54.9 vs 50.6 expected and 50.3 prior. It appears the resurgence of the Covid pandemic in some parts of China at the end of last month is anticipated to hurt August’s PMI readings. The country has already put travel restrictions in place in some areas due to rising infections. Meanwhile, mass testing of millions of people has once again been rolled out.

Elsewhere, ECB member Kazaks said it would be premature for the central bank to make a decision on PEPP future at its next meeting in September. He added that ECB will give reasonable warning before ending PEPP, thus mirroring the US Fed (reiterated a few times the markets will be warned well in advance). At the same time, he said that forward guidance is not tying ECB’s hands’.

In the UK, the Bank of England left its benchmark rate unchanged at 0.1% as widely anticipated, in an 8-0 vote. The total assets program is to stay at £875 billion with GDP expected to have risen to 5% in Q2 and estimated to grow by around 3% in Q3. It is the consensus that GDP will reach pre-pandemic levels in Q4. Regarding inflation, BOE stuck to its earlier stance saying it will be transitory and is projected to fall back to close to the 2% target.

The US oil prices took a tumble this week trading around $68.30 on Friday afternoon after renewed strength in the US dollar. The Delta variant has increase cases and hospitalizations around the world fuelling concerns that demand will be pushed down once more.

Having failed to push above the $1830 mark convincingly, gold prices also headed south and in particular after non-farm payrolls broke below $1800. It seems that a retest of the recent low at $1750 could be on the cards. Bitcoin has fared better for once and is now trading around 42,500. The driver in the crypto space might have been Ethereum though which this week made the big step of transitioning from proof of work (mining) to proof of stake (staking).