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Profit-taking dominates start to the week

The United States added more jobs than expected in February, but wage growth has slowed recently. However, the labour market still appears to be in solid shape, with many companies complaining of labour shortages. Investors continue to focus on monetary policy. Recent statements by Fed and ECB officials have raised hopes of a turnaround in interest rates later this year. However, patience is still called for. In the equity markets, profit-taking brought the record run to an early end.

Alessandro Fezzi, LGT
Temps de lecture
5 minutes
US economy
© Shutterstock

Overall, the monthly labour market statistics from Washington were robust. The US economy created more jobs than expected in February. With 275,000 new jobs created, employment growth was well above the consensus of 200,000. On the other hand, job growth in the previous two months was not as strong as previously thought and was revised down by a total of 167,000 non-farm payrolls. The unemployment rate, calculated in a separate survey, rose surprisingly sharply to 3.9% in February from 3.7% in the previous month. Wage growth also slowed in February. Average hourly earnings still rose by 0.1% on the month. On average, analysts had expected growth to be twice as high. At the beginning of the year, wages had risen by an average of 0.5% month-on-month. Wage growth is important to the Federal Reserve as it tends to add to inflationary pressures.

On the New York Stock Exchange, investors took profits before the weekend, ending the record chase for the time being. The S&P 500 closed 0.65% lower at 5,123.69 and the Nasdaq indices were down around 1.5%. Nvidia shares lost 5.6%. The Dow Jones Industrial closed 0.2% lower on Friday at 38,722.69. The benchmark ten-year US Treasury yield was unchanged at 4.08%, while the US dollar traded at its lowest level against the euro since mid-January.

In the Asia-Pacific region, most stock markets started the new week with losses. In Tokyo, the Nikkei 225 index closed around 2.2% lower, led by technology stocks. This followed revised data showing that Japanese GDP grew by 0.4% in the October-December period last year. This could herald the first interest rate hike by the Bank of Japan. South Korea's Kospi fell 0.8%, while the small cap Kosdaq rose 0.3%. In China, consumer prices rose for the first time after four months of deflation: The annual inflation rate was 0.7% in February. Economists had expected inflation to be 0.3%. At the beginning of the year, Chinese consumer prices had fallen by 0.8% year-on-year. However, the Hang Seng Index in Hong Kong bucked the general downward trend and rose by 1.3%, while the CSI 300 in mainland China rose by 0.8%. In Australia, the S&P/ASX 200 fell 1.8%, retreating from its all-time high and ending a three-day winning streak.

After ECB President Christine Lagarde confirmed the prospect of interest rate easing, at least in the medium term, at last Thursday's rate decision, several ECB exponents appear to be signalling an even faster pace. Joachim Nagel, President of the German Bundesbank and a member of the ECB's Governing Council, said that the likelihood of a first interest rate cut in the eurozone was increasing and that a turnaround in interest rates could possibly be expected before the summer break. This will still depend on economic data, but the outlook has brightened. The head of the Bank of France, Francois Villeroy de Galhau, does not seem to rule out an imminent easing of interest rates. It is very likely that the first rate cut will come in the spring, the ECB's top official told French television. Capital market expectations that we will see lower interest rates in the eurozone before the middle of this year have certainly increased following these comments.  

Meanwhile, the latest data from Eurostat confirmed that the eurozone economy stagnated in the final quarter of last year, supported by government spending and business investment. The stagnation follows a slight contraction in the third quarter. The result is moderate GDP growth of 0.4% for 2023 as a whole.

Corporate news in focus: Q3 results from Oracle.

Economic data in focus: Spanish retail sales.


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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Lten steht Ihnen ein Berater der Bank gerne zur Verfügung.

Herausgeber: LGT Bank (Schweiz) AG, Glärnischstrasse 36, CH-8027 Zürich
Redaktion: Alessandro Fezzi
Quelle: LGT Bank (Schweiz) AG

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