Live Markets: European shares end higher after a difficult week

Interpump SpA

04/08/2023 16:52

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      Main U.S. indexes gain: Nasdaq out front, up ~1%
    

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      Cons disc leads S&P 500 sector gainers; staples weakest
group
    

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      Euro STOXX 600 index up ~0.3%
    

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      Dollar down; bitcoin ~flat; gold, crude up
    

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      U.S. 10-Year Treasury yield slides to ~4.08%
    

  
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    EUROPEAN SHARES END HIGHER AFTER A DIFFICULT WEEK (1143
EDT/1543 GMT)
    The STOXX 600  .STOXX  eked out gains on Friday following a
mixed payrolls report, but the index still fell for the first
week in four as rising bond yields and downbeat earnings had
investors questioning the attractiveness of global equities. 
    The pan-European benchmark closed up 0.3% on Friday, but for
the week was down 2.4%, its first weekly loss since the start of
July. 
    Germany's DAX  .GDAXI , France's CAC 40  .FCHI  and
Britain's FTSE 100  .FTSE  all ended the week lower by between
1.7%-3.1%. 
    Italy's FTSE MIB  .FTMIB  underperformed on Friday after a
fall in Interpump  ITPG.MI  shares after earnings and as index
heavyweight STMicroelectronics  STMMI.MI  declined. 
    "Concerns over earnings guidance downgrades and rising long
term yields weighed on broader market sentiment," said Michael
Hewson, chief market analyst at CMC Markets UK.
    "A mixed US jobs report appears to have stabilized sentiment
after another slowdown in jobs growth ... spoke to the idea that
central bank rate hikes have done their job," Hewson added.
    Here's your closing snapshot:
    
    
    (Samuel Indyk)
     *****
    
    
    U.S. UP, CHINA DOWN, EURO AREA MUTED: IS THE WORLD BECOMING
LESS SYNCHRONIZED? -BOFA (1124 EDT/1524 GMT)
    Most countries moved in tandem when COVID-19 broke out, with
both manufacturing and services on their knees, and
post-pandemic inflation hitting all markets.
    However, as the dust settles, growth and inflation dynamics
are starting to diverge, with the U.S. moving higher, China
lower and the Euro area not showing sings of relevant
acceleration, BofA economists said in a note on Friday.
    The broker currently expects a soft landing for the U.S.
economy rather than a mild recession in the first half of 2024,
as price pressures are diminishing amid solid growth and low
unemployment.
    The labor market report on Friday showed that the U.S.
economy added fewer-than-expected jobs in July, but the
unemployment rate declined to 3.5%, pointing to continued
tightness.
    BofA believes the labor market should continue to cool, but
not as much as it forecasted previously, with the unemployment
rate expected to rise to a peak of 4.3% in the first quarter of
2025.
    Meanwhile, China is having troubles getting up again after
the pandemic slump, leading the Politburo - a top
decision-making body of the ruling Communist Party - to describe
economic recovery as "tortuous".
    BofA insisted on the need of a stronger fiscal stimulus to
reverse the slowdown in the world's second largest economy, but
investors, who have been anxiously awaiting specific measures,
seem to remain skeptical.
    Finally, the recession drum beat is getting louder in the
eurozone after data showed this week that manufacturing activity
contracted in July at the fastest pace since COVID-19 with
demand in factories struggling to recover.
    
    (Matteo Allievi)
     *****

            
    HIGHER TREASURY YIELDS DENT STOCKS (1100 EDT/1500 GMT)
    The rise in U.S. Treasury yields has negatively impacted
stocks, and is likely to weigh on sentiment until the benchmark
10-year yield falls back below its former resistance level at
4.05%, according to Wells Fargo.
    Forecasts of higher U.S. government debt issuance, still
strong economic data and Fitch Ratings' downgrade of the United
States’ top credit rating have contributed to a bond selloff
that propelled the 10-year yield to an almost nine-month high of
4.206% on Friday.  US10YT=RR 
    This “has spooked stocks,” Wells Fargo equity analysts
including Christopher P. Harvey noted in a report. Negative
reactions from Microsoft  MSFT.O , Netflix  NFLX.O , Tesla
 TSLA.O , Uber Technologies  UBER.N  and Advanced Micro Devices
 AMD.O  “suggests optimism has been tempered.”
    Near-term, sentiment may remain subdued.
    Risk aversion groups such as utilities, staples and
low-volatility stocks “have been pushed toward oversold
technical levels,” the analysts said. And, “high beta, while
rebounding, is not quite at 2021's frothy levels. This suggests
many have 'rushed to one side of the boat,' and an oversold
bounce is in the making.”
    “However, we do not believe we are staring at an inflection
point; that likely comes post-summer when the calendar fills out
and September's conference season whips up optimism/risk
seeking,” Wells Fargo concluded.
 
    (Karen Brettell)
     *****     
    
    
        S&P, DOW RISE, CHEERED BY SLOWING JOBS MARKET (1015
EDT/1415 GMT)
  
    The main U.S. indexes are posting slight gains after data
showed a cooling U.S. job market, with the economy adding
fewer-than-expected jobs in July, but still holding steady. It's
a scenario likely to support expectations that the U.S. economy
could avert recession despite aggressive tightening by the Fed.
    Nonfarm payrolls increased by just 187,000 jobs last month,
compared with expectations for 200,000 new jobs. Data for June
was revised lower to 185,000 jobs added instead of the
previously reported 209,000.
    The more worrying factor though is the rise in wage
inflation, with average hourly earnings growing 0.4% in July,
unchanged from the previous month, but a tad higher than
expectations. That kept the year-over-year increase in wages at
4.4%.
   "It's like some of the data we got earlier this week, not too
soft and not too hot," said Randy Frederick, managing director
of trading and derivatives, at Charles Schwab. "It plays into
the soft landing or the no landing narrative that the markets
have been slowly trudging higher on."
    Fed funds futures are now pricing in no more hikes for this
year.
    Meanwhile, Amazon.com  AMZN.O  shares are up big on the day
after the company issued an upbeat outlook for the third
quarter. Apple's  AAPL.O  shares, on the other hand, are down as
the iPhone maker forecast a continued slide in sales.
    Shares of FANG index  .NYFANG  members Microsoft  MSFT.O ,
Alphabet  GOOGL.O  and Snowflake  SNOW.N  are trading higher
after Amazon's cloud business segment beat sales estimates.
    Here is a snapshot of assets across financial markets around
30 minutes after the open:
    
    
    (Gertrude Chavez-Dreyfuss, Sruthi Shankar)
     *****     
    
    
    U.S. STOCK FUTURES DIGEST LATEST JOBS DATA (0900 EDT/1300
GMT)
    U.S. equity index futures are slightly positive in the wake
of the release of the latest data on U.S. employment.
    The July non-farm payroll headline jobs number came in at
187k, which was below the 200k estimate. The unemployment rate
was 3.5% vs a 3.6% estimate. Wage data, on a month-over-month
and year-over-year basis, was hotter than expected:
    
 
    According to the CME's FedWatch Tool  FEDWATCH , the
probability that the FOMC sits on its hands and leaves rates
unchanged at its September 19-20 meeting is now around 82% from
around 78% just prior to the data coming out. The chance that
the Fed increases rates by 25 basis points is now around 18%
from around 22% just before the numbers were released.  
    E-mini S&P 500 futures  ESc1  are up around 0.3%. The
futures were up around 0.2% just before the numbers came out.
    The U.S. 10-year Treasury yield  US10YT=RR  is now around
4.16% vs around 4.19% just before the payroll data was released.
The decline puts the yield's three-day winning streak in
jeopardy.   
    A majority of S&P 500 sector SPDR ETFs are lower in
premarket trade, with tech  XLK.P , off around 0.4%, taking the
biggest hit. This with Apple  AAPL.O  trading down after its
results. On the back of Amazon.com's  AMZN.O  rise after its
results, consumer discretionary  XLY.P  is posting the biggest
gain, up nearly 3%.
    The SPDR S&P regional banking ETF  KRE.P  is off around
0.1%.
    Regarding the jobs data, Brian Jacobsen, chief economist at
Annex Wealth Management, said:
    “Wage growth may have been a touch hotter than expected, but
when combined with a shorter workweek the aggregate weekly
income number was tepid."
    Jacobsen added "There are broad indicators that the labor
market is cooling. The diffusion index for manufacturing shows
ongoing struggles for that sector. It’s a world with pockets of
strength and areas of weakness. Based on this report alone the
Fed doesn’t have a strong case to justify further fiddling with
the federal funds rate."       
    Here is a premarket snapshot about 20 minutes after the data
came out:
    
 
    (Terence Gabriel, Chuck Mikolajczak)
     *****
     
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Jul08042023LM    https://tmsnrt.rs/3qg4856
premarket08042023    https://tmsnrt.rs/3QlhmIx
US morning snapshot    https://tmsnrt.rs/3KrwTmo
Europe shares close 040823    https://tmsnrt.rs/3KrPoa5
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 (Terence Gabriel is a Reuters market analyst. The views
expressed are his own)