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Weekly Update – September 06, 2019

  • Stock markets advanced during a holiday shortened but news-filled week. Upside headline surprises kept the Sharpies™ busy as investors revised their expectations. U.S. employment data came in below expectations, but not enough to induce recession fears; the consensus was they increased the likelihood that the Federal Reserve would cut rates again at its September policy meeting. Better trade developments, easing geopolitical tensions and encouraging U.S. service-economy data also fueled a return to risk assets.
  • U.S. Treasurys came under selling pressure across the yield curve. The ten-year yield rose to 1.55% and the thirty-year climbed to 2.02%, but the widely watched two to-ten-year spread remained inverted. Crude oil prices rose and gold prices fell as market sentiment lifted. The U.S. dollar, as measured by the DXY index, declined for the week.
  • Nonfarm payrolls (NFP) rose by 130,000 jobs in August, below expectations for 160,000. July NFP was revised from 164,000 to 159,000. The unemployment rate was unchanged at 3.7%; underemployment rose to 7.2% from 7.0% and labor force participation rose to 63.2% from 63.0%. By contrast, YoY average hourly earnings were up 3.0% in August, slightly down from 3.2% in July.
  • The August ISM non-manufacturing index rose to 56.4, a three-month high, versus July’s 53.7. New orders were stronger at 60.3 versus July’s 54.1. Markit services PMI was a notable contrast at 50.7, down from July’s 53.0 and lower than the 50.9 flash reading.
  • The August reading of the ISM manufacturing index fell 2.1 points from July to 49.1, below the 50 threshold of contraction. New orders, production and employment declined. The final print of August IHS Markit manufacturing PMI rose 0.4 points from 49.9 to 50.3, pulling the index out of contraction but still the lowest reading since September 2009.
  • July factory orders rose 1.4% versus June; core capital goods orders were revised downward, while core shipments were revised upward.
  • China’s manufacturing activity expanded in August: the Caixin/Markit factory PMI rose from 49.9 in July to 50.4 — better than the 49.8 analysts had predicted. At the same time, however, export sales fell as the trade war with the United States escalated.

CPWM Weekly Market Monitor (2019.09.06)

 

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