The market seems to stabilize after Friday's US labor market data, which was worse than expected. Instead, the figures for June and July data were revised upwards, which means that the average job growth rate is not the worst in the US and the dollar is trying to strengthen.
The dollar index rose to 92.2 points on Monday, but remained near its lowest level in more than a month, as investors pushed back expectations of when the Federal Reserve will start tapering its bond purchases. The U.S. economy added just 235,000 jobs in August against market expectations of 750,000 and against a July gain of 1.05 million, as a rise in COVID-19 infections may have discouraged companies from hiring and workers from actively looking for work. At the same time, growth in average hourly earnings has been stronger than expected, raising concerns about inflationary pressures. So this fall may not paint the best picture of an economy where employment is growing slowly and wages are growing fast, because employers need skilled workers and can raise their wages to keep them from fleeing to competitors who can offer more. Ultimately, rising wages can be paid for by the consumer in more expensive products - and that's how an inflationary spiral can fuel itself.
But markets don't seem to see such a threat for the moment, and European stocks soared to record highs on Monday (especially the Euro Stoxx 50, which is above 4230 points), while tech stocks hit new two-decade highs on hopes of more economic stimulus after weaker data. Talks of more stimulus in Japan and China, where infections have risen again, helped Asian indices rise overnight. Meanwhile, the European Central Bank meets on Thursday, and all eyes will be on the bank's debate on whether it should start tapering its massive PEPP asset purchase program amid an improved economic outlook. It is also worth mentioning that the composition of the popular German Dax index changes to 40 from 30 companies. The companies transferred to it from mDax are Airbus SE, Zalando SE, Siemens Healthineers AG, Symrise AG, HelloFresh SE, Sartorius AG Vz, Porsche Automobil Holding, Brenntag SE, Puma SE and Qiagen N.V. Reuters reports the changes will take effect on Monday, September 20.
In the oil market, Brent crude futures fell more than 1 percent to $71.7 a barrel on Monday after state oil giant Saudi Aramco told customers in a statement on Sunday that it would cut October official selling prices (OSP) for Asia by at least $1 a barrel. The price cuts were larger than expected, signaling less demand and potentially more supply. Elsewhere in the market, there were concerns about a slowdown in U.S. fuel demand due to the resurgence of COVID-19, and weak employment data pointed to a slowdown in the labor market recovery. Investors also factored in the impact of Hurricane Ida on U.S. Gulf of Mexico production and OPEC+'s decision to maintain its plan to increase production by 400,000 barrels per day each month through the end of December.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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