Global equities nudged higher on Friday, while the U.S. dollar positioned itself for a third consecutive weekly gain. This activity comes as investors remain focused on assessing U.S. economic data, which continues to indicate a resilient labor market in anticipation of the essential monthly jobs report.
Date: Aug 04, 2023
Place: New Delhi, India
The MSCI All-World index marked a modest rise of 0.1%, though it’s still on course for its largest weekly dip in five months. This descent is partially credited to a spike in government bond yields this week, spurred by additional data highlighting slowing inflation and the impending influx of U.S. Treasury supply.
Investors around the world have their sights set on the July U.S. nonfarm payrolls report, with a consensus of 80 economists projecting an increase of 200,000 payrolls last month. Following a rise of 209,000 in June, this estimate builds anticipation for a strong monthly performance.
Optimism is growing among economists who had once forecasted an economic downturn by the end of the year. Now, they find the “soft-landing” scenario envisaged by the U.S. Federal Reserve increasingly feasible. “Today’s U.S. payrolls data is likely to continue to showcase the resilience of the U.S. economy,” said Michael Hewson, chief market analyst at CMC Markets.
In another upbeat sign, data showed a slight uptick in Americans filing for unemployment benefits last week, while layoffs reached an 11-month low in July. Futures on the S&P 500 and the Nasdaq 100 have also risen, spurred by strong earnings reports from technology leaders such as Amazon and Apple.
However, the market isn’t without its uncertainties. “It’s a very fragile market,” commented Francesco Sandrini, head of multi-asset strategy at Amundi. “The market is quite nervous at the moment, the very low volatility that has been prevailing so far now is facing a reality check.”
Meanwhile, the dollar’s continuous rise, marking a 0.1% increase against a basket of major currencies, further illustrates its strength. This trend has been most notable against some of this year’s better-performing currencies, such as the Australian dollar and the pound.
Investors are also closely watching developments in China. The yuan, set for a 0.6% loss this week against the dollar, found some relief after the central bank announced plans to maintain ample liquidity in the banking system.
Another significant aspect of the U.S. financial picture came from the Treasury market, where 10-year yields are holding steady around nine-month highs. Rating agency Fitch shocked markets earlier this week by removing the United States’ triple-A credit rating, emphasizing the country’s deteriorating fiscal situation.
On the commodities front, oil prices are heading for a sixth consecutive weekly gain, driven by the prospect of reduced supply from major players such as Saudi Arabia and Russia.
As investors weigh these complex factors, the markets continue to respond, revealing a financial landscape that is constantly evolving. The interplay between economic indicators, currency movements, corporate earnings, and global challenges ensures that the story of the global economy remains compelling and ever-unfolding.
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Source- Reuters, Money Control, The Print