Weak ADP employment data supported stock indices. Australia has seen an increase in exports

October 5, 2023

At yesterday’s stock market close, the Dow Jones Index (US30) increased by 0.39%, while the S&P 500 Index (US500) added 0.81%. The NASDAQ Technology Index (US100) closed positive by 1.35% on Wednesday. Stocks closed modestly higher on Wednesday as lower bond yields temporarily eased interest rate concerns and supported gains in equities. Bond yields fell after the monthly ADP employment report showed fewer jobs than expected, a dovish factor for Fed policy.

The ADP US employment change for September came in at an 89,000 increase, weaker than expectations of 150,000 and the lowest increase in 2.5 years. The ISM Services Business Activity Index for September fell from 0.9 to 53.6, stronger than expectations of 53.5. Factory orders in the US for August rose by 1.2% m/m, stronger than expectations of 0.3% m/m.

Alphabet (GOOGL) closed higher by more than 2% after introducing the new Pixel 8 and Pixel 8 pro phones, as well as the new Pixel Watch. The company also said it will release a version of its Bard artificial intelligence-powered virtual assistant. Palantir Technologies (PLTR) closed higher by more than 5% as the company emerged as the top bidder for a contract to modernize the UK’s National Health Service.

Equity markets in Europe were mostly down on Tuesday. Germany’s DAX (DE40) added 0.10%, France’s CAC 40 (FR 40) closed at its opening price, Spain’s IBEX 35 (ES35) fell by 0.58%, and the UK’s FTSE 100 (UK100) closed down by 0.77%. Eurozone retail sales fell by 1.2% m/m in August, weaker than expectations of 0.5% m/m and the largest decline in 8 months. The eurozone goods and services price index came in at a record drop of 11.5% y/y in August after 7.6% y/y in July, which was in line with expectations.

ECB President Lagarde said yesterday that future ECB decisions “will ensure that interest rates are set at sufficiently restrictive levels for as long as necessary.” Investors viewed this ECB stance as hawkish.

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On Wednesday, Saudi Arabia and Russia announced they would maintain their oil production cuts through the end of the year. But oil prices fell by nearly 6%, marking the biggest one-day sell-off since September 2022. The collapse in oil prices on Wednesday came amid several factors. Chief among them was concern about the state of the global economy, especially the most vulnerable Europe versus the relatively robust US economy. Another driving force behind Wednesday’s drop in oil prices was the seasonal slowdown in US demand, a fact that seems to have been missed by those betting that the last quarter’s oil rally would continue indefinitely.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) decreased by 2.28% on Wednesday, China’s FTSE China A50 (CHA50) will not trade for the rest of the week due to holidays, Hong Kong’s Hang Seng (HK50) fell by 0.78%, and Australia’s ASX200 (AU200) was negative 0.77%.

The Australian Bureau of Statistics released the trade balance data for August, which showed a significant increase in Australian exports (+4% for the month while -2% was expected), which may provide temporary support to the Australian dollar (AUD). Why temporary? Because the AUD is being dovishly supported by the Reserve Bank of Australia (RBA).

S&P 500 (F)(US500) 4,263.75 +34.30 (+0.81%)

Dow Jones (US30) 33,129.55 +127.17 (+0.39%)

DAX (DE40) 15,099.92 +14.71 (+0.10%)

FTSE 100 (UK100) 7,412.45 −57.71 (−0.77%)

USD Index 106.78 −0.21 (−0.20%)

News feed for 2023.10.03:

– Australia Trade Balance (m/m) at 03:30 (GMT+3);
– German Trade Balance (m/m) at 09:00 (GMT+3);
– UK Construction PMI (m/m) at 11:30 (GMT+3);
– Canada Trade Balance (m/m) at 15:30 (GMT+3);
– US Trade Balance (m/m) at 15:30 (GMT+3);
– US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
– Canada Ivey PMI (m/m) at 17:00 (GMT+3);
– US Natural Gas Storage (w/w) at 17:30 (GMT+3);
– US FOMC Member Daly Speaks (m/m) at 18:30 (GMT+3);
– US FOMC Member Barr Speaks (m/m) at 19:15 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

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Weak ADP employment data supported stock indices. Australia has seen an increase in exports