U.S. equities closed higher on Friday as investors placed lower odds on another rate hike through 2017 after a weaker than expected job report.
The Dow Jones industrial average gained 39.46 points (0.14%) to settle at 21,987.56 as Goldman Sachs contributed the most gains. The S&P 500 inched up 4.9 points (0.20%) to close at 2,476.55, led by energy stocks, favorable driven by storm Harvey. Nasdaq composite was up by 6.67 points (0.10%) to finish at 6,435.33. For the week as a whole, U.S. stock indexes remained in the green, with Nasdaq composite outperforming again.
On Tuesday, U.S. consumer confidence continued to improve and reached the second highest level of 122.9 in August (vs. 120.0 in July) since December 2000 (beside the March figure of 124.9). Will improved consumer sentiment translate into higher spending and inflation?
On Wednesday, China reported its official Manufacturing Purchasing Managers’ Index (PMI) in August, which grew to 51.7 (vs. 51.4 in July), above street consensus of 51.3. The solid figure was driven by the new orders and production sub-indexes, which climbed to 53.1 (vs. 52.8 in July) and 54.1 (vs. 53.5 in July), respectively.
In addition, U.S. released its revised Q2 2017 GDP figure, which rose at a 3.0% annual rate, outpacing the 2.6% previously reported and better than street expectations. The upward GDP revision was attributable to robust consumer spending and strong business investments.
On Thursday, China Caixin Manufacturing PMI came in at 51.6 in August (vs. 51.1 in July), the highest since February 2017, driven by strong foreign demand, which led to new order growth.
U.S. released its July pending home sales, which slipped 0.8% unexpectedly, as inventory in the housing market remained tight.
On the same day, U.S. reported the Fed-preferred inflation measure, Personal Consumption Expenditure (PCE), which registered a 1.4% QoQ gain in July, unchanged from the prior month, while core PCE slipped to 1.4% (vs. 1.5% in June). Will the recent weakness in dollar (i.e. drive higher imports) and Hurricane Harvey translate into higher inflation down the road?
In addition, eurozone inflation reached a four-month high to 1.5% in August (vs. 1.3% in July), thanks to improved oil prices. However, core inflation, which stripped out volatile items such as energy and food, remained flat at 1.2%. Positively, unemployment rate was 9.1% in July, staying at the lowest level since February 2009, with Germany leading the employment prospect, a nation with 3.7% jobless rate.
Further, Canada reported Q2 2017 annualized GDP growth of 4.5%, exceeding street consensus of 3.7%. The strong economic growth was attributable to robust export activities and household spending, despite a contraction witnessed in housing investments. Coupled with Q1 GDP growth figure, the country saw its strongest six-month start to a calendar year in 15 years, according to Statistics Canada. The result could mean an October rate hike has become very likely, while the scenario of a rate increase next week (Sept 6) is back on the table. In response, loonie strengthened against the U.S. dollar and the 2-year government yield spiked.
On Friday, U.S. reported disappointing non-farm payrolls figure, which increased 156,000 in August (vs. 189,000 in July), missing the street expectations of 180,000 job creation. As a result, unemployment rate ticked up to 4.4% in August (vs. 4.3% in July). Once again, employment could continue to exhibit short-term weakness (so does Q3 GDP) before the full recovery from Hurricane Harvey.
The week ahead: U.K. will release August Services PMI result, eurozone will publish revised Q2 2017 GDP figure as well as August retail sales on Tuesday (Sep 5); U.S. will report ISM Non-Manufacturing PMI in August and Fed’s economic beige book, and Bank of Canada will announce interest rate decision on Wednesday (Sep 6); European Central Bank will also meet to discuss monetary policy and Japan will release its Q2 2017 GDP result on Thursday (Sep 7); Canada will publish August employment report and China will release its trade balance on Friday (Sep 8).
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AMJourney 
Market Commentary – September 1, 2017
U.S. equities closed higher on Friday as investors placed lower odds on another rate hike through 2017 after a weaker than expected job report.
The Dow Jones industrial average gained 39.46 points (0.14%) to settle at 21,987.56 as Goldman Sachs contributed the most gains. The S&P 500 inched up 4.9 points (0.20%) to close at 2,476.55, led by energy stocks, favorable driven by storm Harvey. Nasdaq composite was up by 6.67 points (0.10%) to finish at 6,435.33. For the week as a whole, U.S. stock indexes remained in the green, with Nasdaq composite outperforming again.
On Tuesday, U.S. consumer confidence continued to improve and reached the second highest level of 122.9 in August (vs. 120.0 in July) since December 2000 (beside the March figure of 124.9). Will improved consumer sentiment translate into higher spending and inflation?
On Wednesday, China reported its official Manufacturing Purchasing Managers’ Index (PMI) in August, which grew to 51.7 (vs. 51.4 in July), above street consensus of 51.3. The solid figure was driven by the new orders and production sub-indexes, which climbed to 53.1 (vs. 52.8 in July) and 54.1 (vs. 53.5 in July), respectively.
In addition, U.S. released its revised Q2 2017 GDP figure, which rose at a 3.0% annual rate, outpacing the 2.6% previously reported and better than street expectations. The upward GDP revision was attributable to robust consumer spending and strong business investments.
On Thursday, China Caixin Manufacturing PMI came in at 51.6 in August (vs. 51.1 in July), the highest since February 2017, driven by strong foreign demand, which led to new order growth.
U.S. released its July pending home sales, which slipped 0.8% unexpectedly, as inventory in the housing market remained tight.
On the same day, U.S. reported the Fed-preferred inflation measure, Personal Consumption Expenditure (PCE), which registered a 1.4% QoQ gain in July, unchanged from the prior month, while core PCE slipped to 1.4% (vs. 1.5% in June). Will the recent weakness in dollar (i.e. drive higher imports) and Hurricane Harvey translate into higher inflation down the road?
In addition, eurozone inflation reached a four-month high to 1.5% in August (vs. 1.3% in July), thanks to improved oil prices. However, core inflation, which stripped out volatile items such as energy and food, remained flat at 1.2%. Positively, unemployment rate was 9.1% in July, staying at the lowest level since February 2009, with Germany leading the employment prospect, a nation with 3.7% jobless rate.
Further, Canada reported Q2 2017 annualized GDP growth of 4.5%, exceeding street consensus of 3.7%. The strong economic growth was attributable to robust export activities and household spending, despite a contraction witnessed in housing investments. Coupled with Q1 GDP growth figure, the country saw its strongest six-month start to a calendar year in 15 years, according to Statistics Canada. The result could mean an October rate hike has become very likely, while the scenario of a rate increase next week (Sept 6) is back on the table. In response, loonie strengthened against the U.S. dollar and the 2-year government yield spiked.
On Friday, U.S. reported disappointing non-farm payrolls figure, which increased 156,000 in August (vs. 189,000 in July), missing the street expectations of 180,000 job creation. As a result, unemployment rate ticked up to 4.4% in August (vs. 4.3% in July). Once again, employment could continue to exhibit short-term weakness (so does Q3 GDP) before the full recovery from Hurricane Harvey.
The week ahead: U.K. will release August Services PMI result, eurozone will publish revised Q2 2017 GDP figure as well as August retail sales on Tuesday (Sep 5); U.S. will report ISM Non-Manufacturing PMI in August and Fed’s economic beige book, and Bank of Canada will announce interest rate decision on Wednesday (Sep 6); European Central Bank will also meet to discuss monetary policy and Japan will release its Q2 2017 GDP result on Thursday (Sep 7); Canada will publish August employment report and China will release its trade balance on Friday (Sep 8).
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A small potato working on Bay Street