CURRENCY MARKET WRAP
As of Mon Jul 8th, Singapore Time zone UTC+8
Dollar Index +0.54%, 97.29
USDJPY, +0.61%, $108.47
EURUSD, -0.52%, $1.1226
GBPUSD, -0.43%, $1.2525
USDCAD, +0.19%, $1.3077
AUDUSD, -0.61%, $0.6979
NZDUSD, -0.88%, $0.6629
U.S. job growth rebounded strongly in June, with government payrolls surging, but persistent moderate wage gains and mounting evidence the economy was losing momentum could still encourage the Fed to cut interest rates this month.Nonfarm payrolls increased by 224,000 jobs last month as government employment rose by the most in 10 months, and construction and manufacturing hiring regained speed. The economy created only 72,000 jobs in May. Economists polled by Reuters had forecast payrolls rising 160,000 in June. Average hourly earnings rose 0.2% in June after gaining 0.3% in May. That kept the annual increase in wages at 3.1% in June for a second straight month.
The solid report served as another reminder that the U.S. economy continues holding up well against a backdrop of slowing activity elsewhere. Friday’s news weighed on Treasuries, sending the 10-yr yield higher by ten basis points to 2.05%, while the implied likelihood of a 50-basis point rate cut fell to just 4.9% from 29.2% on Wednesday. The fed funds futures market remains certain that a 25-basis point cut will take place on July 31.
In corporate news, Deutsche Bank will cut approximately 18,000 jobs over the course of the next three years as part of a major reorganization, BBC reported Sunday. Deutsche Bank will exit its Equities Sales & Trading business, while retaining a focused equity capital markets operation. In addition, the bank plans to resize its Fixed Income operations in particular its Rates business and will accelerate the wind-down of its existing non-strategic portfolio. In aggregate, Deutsche Bank will reduce risk-weighted assets currently allocated to these businesses by approximately 40%.
In Geopolitical news, Iran said on Sunday it will shortly boost its uranium enrichment above a cap set by a landmark 2015 nuclear deal, prompting a warning ‘to be careful’ from Trump, who has pressured Tehran to renegotiate the pact. In a sign of heightening tensions, France, Germany and Britain – all parties to the deal – expressed concerns over the step taken by Tehran, its latest effort to force the West to lift sanctions ravaging its limping economy. In a live news conference, senior Iranian officials threatened further violations, saying Tehran would keep reducing its commitments every 60 days unless European parties to the agreement protected it from sanctions imposed by Trump.
STOCK MARKET WRAP
S&P500, -0.18%, 2,990.41
Nasdaq, -0.21%, 7,841.30
Nikkei Futures, +0.14%, 21,700.0
Equities stumbled out of the gate after a much stronger than expected headline reading of the June Employment Situation report dampened hopes for aggressive action from the FOMC.
Seven out of eleven sectors ended the day in negative territory. Countercyclical real estate (-0.6%) and health care (-0.7%) settled at the bottom of the leaderboard with health care pressured by biotech names after President Trump said that his administration is preparing a “favored-nations clause” that would reduce prices that Medicare pays for drugs. The iShares Nasdaq Biotechnology ETF (IBB 109.22, -1.71, -1.5%) narrowed this week’s gain to just 0.2%.
The top-weighted technology sector (-0.2%) settled in line with the broader market as relative strength in largest sector components outweighed continued weakness among chipmakers. The PHLX Semiconductor Index lost 0.6% with 24 of its 30 components ending in the red. AMD (AMD 31.50, +0.31, +1.0%)was among the outperformers amid speculation that the company’s newest video cards that will become available on Sunday will challenge corresponding offerings from NVIDIA (NVDA 160.23, -2.52, -1.6%)when it comes to price and performance.