â– Markets boosted to new highs as Jul Nonfarm Payrolls hits 225K job additions
â– S&P 500 hits new all-time high at 2182.87 points
â– Nasdaq hits new all-time high at 5,221.12 points
â– Expectations of a Sept Fed hike sends USD to new highs vs. EUR
â– BoE rate cut weakens GBP, though U.K. stocks enjoy offsetting gain
â– Decline in crude inventories aid oil recover from four-month-lows
A fairly indecisive week for equity ended with a Friday boom as July’s Nonfarm Payrolls pointed to 255K jobs added to the U.S. economy, far surpassing expectations for just 180K. More importantly perhaps, Average Hourly Earnings also indicated of a 0.3% Month over Month gain, besting analyst expectations for a 0.2% increase. In spite of positive indications for the state of the U.S. economy given earlier that week by the ADP Employment Report, the strong Nonfarm print was followed by a surge of buys into U.S. equity. This aided the S&P 500 add 0.9% during the day, leading it to a new all-time high of 2,182.87 points and the Nasdaq composite adding a little over a percentage point, also setting a new all-time high, at 5,221.12 points.
In addition to its insight on the economy as a whole, the positive signal on the job market also means that in spite of more accommodative monetary policy worldwide, a rate hike in the upcoming Sept 21st decision is not entirely out of the question. Subsequently, according to Bloomberg’s calculations, odds of a hike at this decision, derived from the U.S. bond market went from around 18% to 26%, as the data was out. This also meant a strengthening of the USD, with EUR/USD falling to a level of 1.1046 during the day, concluding to a 0.8% weekly strengthening of the Dollar vs. the Euro. Gold took a heavier blow, losing about 1.8% during the day, closing at exactly USD 1,336 per oz.
BoE takes the plunge, following oil’s trail
After refraining from a move in its previous rate decision, the bank of England went full speed ahead on Thursday, with a 0.25% rate cut and the biggest stimulus package since the financial crisis erupted. It also saw an expansion of asset purchases made by the bank to GBP 435 B, from a current 375. The market response here was quite sharp, with a 1.7% or so weakening of the GBP vs. the USD on the announcement, though that did follow some strengthening of the Pound at the beginning of the week, summing the weekly decline of the pair to 1.2%. The contribution to U.K. equity from more accommodative settings summed to the FTSE 100 adding about 1.6% on Thursday, thus merely partially offsetting the depreciation of the Pound.
