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Worst Week For Stocks Since February As U.S. Jobs Growth Slows

By CMC Markets (Jasper Lawler)Stock MarketsMay 09, 2016 10:00
uk.investing.com/analysis/worst-week-for-stocks-since-february-as-us-jobs-growth-slows-200128461
Worst Week For Stocks Since February As U.S. Jobs Growth Slows
By CMC Markets (Jasper Lawler)   |  May 09, 2016 10:00
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UK and Europe

Markets had an undistinguished finish to a rough week after data showed US job growth slowed in April, adding to concerns that the global economy has hit a soft patch. Feeble economic data from China to Europe to the US has prompted the worst weekly slide in European stocks since mid-February.

Global economic and corporate earnings growth appears to have crested for the time being so current market valuations are being questioned.

The FTSE 100 spent most of the day less than half-a-percent in the red. A good showing for the by-and-large more market-friendly Conservative Party in local elections has had little bearing on sentiment. A Labour Party wash-out that some were forecasting might have garnered a bigger market reaction.

A spike in the price of gold (spurred on by weak US jobs data that has put back the timing of any rise in interest rates) has helped gold-miner Randgold (LON:RRS) rise to the top of the UK equity benchmark whilst Inmarsat (LON:ISA) sank for a second day, leading the decliners.

Rio Tinto (LON:RIO) shares erased early losses to post modest gains after confirming plans to invest into the Oyyu Tolgoi copper mine in Mongolia. There is some scepticism over the timing of the investment when copper prices sit near decade-lows. Still, Rio’s investment into copper has been very selective. This is one of the best under-developed projects. Initial production would start in 2020, by which time a shortage of copper supply from a pullback in capex across the industry is likely to have pushed copper prices higher.

Shares of ArcelorMittal (LON:0NSF) recovered early losses after the world’s largest steel company posted another loss while forecasting a ‘fragile’ rise in steel demand.

Excalibur Steel is speaking with bankers for funding to buy Tata Steel's (NS:TISC) UK operations. Bank-supported funding would address one of the major obstacles to Excalibur’s bid but plans to offload the pension scheme to the taxpayer-backed PPF likely needs to be scrapped before a deal would be acceptable.

US

US stocks pulled back from three-week lows as investors bought the dip brought on by weak unemployment data, supported by the idea the Fed is likely to keep rates low for longer. US tech companies continue to drag with the Nasdaq down 10% from its record high.

Shares of Square (NYSE:SQ), Twitter chief executive Jack Dorsey’s mobile payment company tanked 15% after it reported a wider than expected loss of 14c per share amid a jump in operating expenses.

Call of Duty-maker Activision Blizzard (NASDAQ:ATVI) shares shot higher after reporting a surprise first quarter EPS of 8c and raised its full-year guidance.

Camera-maker GoPro (NASDAQ:GPRO) shares lost 6% after missing profit estimates and delaying the release of its new drone camera.

FX

The US dollar was mostly stronger on Friday despite a slowdown in US job growth which closed the door on any chance of a June rate hike. Steady wage growth and a rise in the participation rate offset concerns that led to a kneejerk sell-off in the greenback. In many ways it was the kind of goldilocks report that markets like, cold enough to put-off a rate hike but warm enough to suggest the US is far from a recession.

EUR/USD erased a 50 pip gain made after NFP data was released but held 1.14, leaving it closed to unchanged on the day. GBP/USD was relatively weaker, hitting its lowest since June 25 after the jobs data, only to recover from the lows.

The Aussie dollar was the biggest faller after the RBA cut its inflation targets, adding to recent weakness brought on by a surprise rate cut.

Commodities

Gold has been the biggest beneficiary of the US jobs data, gaining $15 and on target to challenge $1300 per oz. The environment remains favourable for gold, stocks are pulling back and the ongoing low-rate environment suits non-interest bearing assets.

Brent crude flirted with two-week lows before oil rebounded with the rest of the commodity complex after the weaker US unemployment report.

DISCLAIMER: CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.

No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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Worst Week For Stocks Since February As U.S. Jobs Growth Slows
 

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Worst Week For Stocks Since February As U.S. Jobs Growth Slows

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