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Wall Street falls following the US unemployment rate report

Published 2024/06/10, 08:24

Following the release of a stronger-than-expected US jobs report, Wall Street declined on Friday, with all three major averages shedding about 0.30% each. This led traders to scale back bets that the Federal Reserve (Fed) would soon cut interest rates. The US economy added 272 thousand jobs in May, surpassing forecasts of 185 thousand, while wages rose by 0.40%, exceeding the expected 0.30% increase. Consequently, the likelihood of a Fed rate cut in September dropped from 68% to 55% prior to the release. However, for the week, the S&P 500 was up by 1.40%, the Nasdaq soared by 2.60%, and the Dow gained 0.50%.

Meanwhile, the FTSE/JSE All Share Index (ALSI) finished approximately 0.40% down at 76 852, following a volatile session on Friday. Investors digested the latest US jobs report while keeping an eye on South Africa's political developments. Opposition parties continued critical discussions regarding the ruling African National Congress's offer to form a government of national unity. On the corporate front, resource-linked stocks and telecommunication companies were among the top losers. However, retailer TFG jumped more than 11% after declaring a 33.30% increase in final dividend for the year ending 31 March over the previous year. For the week, the ALSI added approximately 0.20%.

In Europe, markets followed suit with slight declines on Friday, trimming gains from the two prior sessions. The STOXX 50 eased by 0.30% from its 23-year peak in the previous session, closing at 5 053, while the STOXX 600 closed just below the flatline at 524, less than one point away from its record high. Losses were spread across most major sectors of the Eurozone’s benchmark index, with Airbus (EPA:AIR) and Vinci each dropping close to 2.50% to lead the decline in industrials. In the UK, the FTSE dropped by 0.50% to 8 245 on Friday, marking its fourth consecutive weekly loss, the longest streak since 2020. This followed investors' reactions to strong US payrolls and wage growth by delaying Fed cut bets. Among single stocks, Redcentric fell by over 6% as Wiit announced it wouldn't bid for the company. In the FTSE 250, C&C Group lost about 7.50% after its CEO resigned due to accounting issues, along with prior year adjustments.

On the other hand, Asian markets recorded gains on Friday. The Shanghai Composite edged up by 0.08% to close at 3 051, while the Shenzhen Component dropped by 0.90% to 9 256 in mixed trade. Mainland stocks struggled for clear direction as investors reacted to China's latest trade figures. China's May exports surged by 7.60% from a year ago, exceeding forecasts of 6% and accelerating from a 1.50% gain in April. However, Chinese imports increased by only 1.80% last month, missing forecasts of 4.20% and sharply slowing from an 8.40% growth in April. In Japan, the Nikkei 225 shed 0.05% to close at 38 684, while the broader Topix lost 0.08% to 2 755 on Friday, relinquishing some gains from the previous session as caution prevailed ahead of a key US monthly jobs report that could offer more insights into the Federal Reserve’s monetary policy path. In corporate news, Shionogi & Co tumbled by 12.9% after the Japanese pharmaceutical giant released its latest R&D report detailing its pipeline projects.

In commodities, oil saw its third consecutive week of declines, with WTI crude futures dropping by around 2% to below $75.5 per barrel. This was driven by increasing expectations that borrowing costs could remain elevated for an extended period, negatively impacting the demand outlook. Gold followed suit, trading below $2 320 per ounce on Friday, marking the lowest in a month. This was pressured by a hawkish turn in expectations for the Federal Reserve and evidence of lower central bank buying in Asia.

PSG Wealth Daily Investment Update, 10 June 2024

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