Shares extend rally on soft US job report and further Chinese stimulus

Signs of a loosening job market helped lift the major US equity indices last week, as investors grew increasingly confident the Federal Reserve may soon be able to wrap up its historically aggressive interest rate-hiking campaign.  The S&P 500 Index climbed to a four-week intraday high early Friday before fading slightly but still managed to end the week higher by 2.5%.  Meantime, the Nasdaq Composite finished marginally lower on Friday but was still up 2.6% for the week.  In Europe, the Euro Stoxx 50 Index gave back all the gains for the week falling by 0.3% on Friday. 

Summary for 04.09.2023 

• Most Asian equities rose sharply on Monday as mixed US employment data cemented expectations that the Federal Reserve will keep rates on hold, while markets digested more stimulus from China.  Hong Kong’s Hang Seng index surged 1.8%, buoyed chiefly by property shares as Country Garden earned bondholder approval to extend some debt deadlines, averting a potential default.   
• European shares are set to nudge higher at the open as investors assess China’s property-market measures and the timing of peak Fed rates.  Meantime, US markets will be closed on today due to the Labour Day holiday. 
• Oil prices steadied at seven-month peaks early this morning, retaining their strong gains from the prior week as traders looked to more Saudi Arabian and Russian supply reductions in the coming months.  Russia said last week that it will outline more reductions in supply this week, along with the broader OPEC+.  This came amid growing expectations that Saudi Arabia will also extend a one million barrel per day cut into October. 

• The US economy added 187,000 jobs in August, compared to the downwardly revised 157,000 in July and more than market expectations of 170,000.  Still, it was the third consecutive month with job gains falling below the 200,000 threshold, indicating a gradual easing of labour market conditions.  Of particular interest, average hourly earnings rose by 8 cents, or 0.2%, to $33.82 after a 0.4% advance in the prior month and below market estimates of 0.3%. 
• The ISM Manufacturing PMI in the US climbed to 47.6 in August from the previous month’s 46.4, slightly exceeding the market consensus of 47.0.  However, this reading this indicated that economic activity within the manufacturing sector had contracted for the tenth consecutive month.  The PMI has consistently remained below the 50 threshold since last November, which is the most extended stretch of its kind since the Great Recession of 2007-2009. 
• Dell Technologies shares rallied 21% on Friday after the computer maker’s quarterly results surpassed Wall Street forecasts. 
• Lululemon Athletica shares rose by 6% after the athletic apparel retailer reported earnings Friday that topped analysts’ expectations. 
• Vale shares meantime rallied by over 6% after JPMorgan upgraded the metals and mining Company’s share to “overweight” from “neutral”, saying its shares look too cheap following a recent pullback. 

• VMware shares fell 2.8% on Friday after the cloud services company late Thursday posted mixed second-quarter results, with earnings per share topping expectations but revenue falling short. 
• This will be a relatively light week in the US, with the spotlight on ISM Services PMI, factory orders, and foreign trade data.  Elsewhere, Australia and Canada will announce interest rate decisions.  Also, inflation rates will be monitored in Turkey, South Korea, the Philipines, Mexico and Russia.  GDP growth figures will be released for Australia, South Africa, and Switzerland.  Additionally, Service PMI reading for China, Spain, Italy, and Brazil will be released.