The Palais Brongniart, former headquarters of the Paris Stock Exchange. (Photo credit: Adobe Stock)
(CercleFinance.com) – The markets react negatively to US employment figures considered very solid (+528,000) and the Paris Stock Exchange accelerates its fall to 6,455, that is, -0.9%, which reduces the gain weekly at a symbolic gain of +0.1%.
The Euro-Stoxx50 falls -1% (3,720), bringing the rise to +0.6% compared to last week. On Wall Street, the Dow Jones is expected to fall -0.8%, the S&P500 -1.2% and the Nasdaq should lose more than 1.5%.
The dollar jumped +0.9% against the euro to 1.014 and +1.1% against the pound (UK will be in recession for 4 quarters according to the BoE which forecasts a negative GDP of -1.5% in 2023 ).
The monthly US jobs report says the US economy generated 528,000 nonfarm payrolls in July (372,000 in June), according to the Labor Department, well above the +250,000 consensus, and the unemployment rate fell 0.1 point to 3.5%, thus returning to its pre-Covid level, in early February 2020.
The labor participation rate stood at 62.1%, a level that, however, is still 1.3 points lower than that of February 2020, and the average hourly income increased to an annual rate of 5.2%.
In addition, job creation for the two previous months was revised, going from 384,000 to 386,000 for May and from 372,000 to 398,000 for June, that is, a total revision balance of +28,000 for these two months.
Thus, the labor market remains one of the last big engines of the US economy to hold its ground, with job creation still strong and the unemployment rate remaining very low, reflecting a situation of full employment.
The prospect of a multiplication of interest rate hikes by the Federal Reserve grows and the fixed income markets react negatively: T-Bonds tighten +12.5pts to 2.80%, which cancels out the week’s gains .
According to CME Group’s FedWatch Barometer, the market is estimating a 65% chance of a 50 basis point Fed hike next month and a 40% chance of a quarter point hike.
In Europe, our OAT and Bunds rallied +6pts to 1.415 and 0.864% respectively, BTP posted just +2pts to 2.85% (‘spread’ reduced to just +200pts vs Bund).
Investors were able to learn this morning of an increase in production in June 2022 in the manufacturing industry in France (+1.2% after +1%) and in the industry as a whole (+1.4% after +0 .2%), according to data adjusted for seasonality and business days (CVS-CJO).
The INSEE, which publishes these figures, specifies that production grows again in capital goods (+3.5%) and transport material (+2.8%), and picks up in extractive industries, energy, water (+ 2.4%) as well as in industrial food (+2.2%).
The production of the second quarter of 2022 is higher than that of the same quarter of 2021 in the manufacturing industry (+2%). For industry as a whole, the increase was significantly more moderate (+0.2%) due to the drop in energy production.
France’s current balance of payments deteriorated sharply in the second quarter, mainly due to rising energy bills, data released by the Banque de France showed.
The current account deficit stood at 8,600 million euros in CVS-CJO data for the quarter, a deterioration of 7,500 million compared to an already deficit first quarter (-1,100 million).
In addition, France’s trade balance posted a deficit of almost 13.1 billion euros in June, compared to a deficit of 12.9 billion the previous month, according to CVS-CJO data from the Customs Administration.
As earnings season draws to a close, some European heavyweights will also file their quarterly accounts today, including German insurance giant Allianz.
In securities news, Rothschild & Co publishes for the first six months of the year, the group’s share of net income declined 28% to €249m, or EPS of €3.43, despite revenue increased 2% to almost 1.38 billion euros.
Maurel & Prom publishes for the first half of 2022 a net profit of 138 million dollars, more than four times the annual comparison (32 million a year earlier), and a gross operating surplus of 250 million, 113% more.
Finally, Sanofi announces the establishment of a collaboration with the Innovent Biologics laboratory, which has a large presence in China, with the aim of making innovative medicines available to patients suffering from difficult-to-treat cancers in this country.
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