Stock markets were mostly trading lower after unemployment claims in the US dropped to the lowest level since February. That signalled to some market participants that the Federal Reserve (Fed) is likely to continue its current rate hiking cycle. A strong downward adjustment to Japan’s gross domestic product (GDP) for the second quarter also caused nervousness on Asian markets on Friday.
Initial jobless claims in the US fell by 13,000 to 216,000 last week, making it the lowest number of Americans seeking new unemployment benefits since February. It was also the fourth straight weekly decline in a row. Another report by the US Labor Department released on Thursday showed that the productivity of workers was also strong. Productivity – measured by hourly output – was up 3.5% in the second quarter. The combination of low unemployment claims and strong productivity was taken by some investors as a sign that the US labour market is still tight even as data has begun to soften recently. A strong labour market gives the Fed room to continue increasing interest rates without causing too much damage to the labour market. The Fed makes its next monetary policy decision in two weeks.
In New York, the Dow Jones Industrial managed to pull off a gain on Thursday, ending the session up 0.2%, while the S&P 500 dropped 0.3%. Apple shares ended Wednesday’s session down 2.9% after reports that China is planning to widen a ban on iPhones used by government employees. The reports were taken as a sign that the tense relations between the US and China could heat up and cause more damage to the tech sector. The drop in Apple’s share price – along with its suppliers and other companies with large exposure to China – pressure tech stocks on Thursday. The Nasdaq-100 fell 0.7%.
In Asia, stock markets remained under pressure at the end of the week. The main headline causing commotion on Friday was Japan’s GDP figure for the second quarter, which was adjusted downward to 4.8% from 6.0%. Consumption in the second quarter fell and so did real wages adjusted for inflation in July. The economic data releases caused some investors to question whether consumers are strong enough to support a recovery in the world’s third-largest economy. The Nikkei 225 was trading down 1.3 % on Friday.
In other Asian market news, Hong Kong’s exchange was closed for the day due to a storm with heavy rains. In mainland China, markets were trading in the red with the Shanghai Composite down 0.1%. In South Korea, the Kospi lost 0.6% and Australia’s S&P/ASX 200 lost 0.4%.
In Europe, the weak economic data kept pouring out of the continent’s largest economy this week. Industrial production in Germany fell by 0.8% in July compared with the previous month. It was the third monthly drop in a row. Germany has recently been a cause for concern in the euro area and was in a recession late last year and the start this year. Germany’s stagnation in the second quarter of 2023 didn’t help the euro area either, with the bloc’s gross domestic product growing only 0.1% during the second quarter, according to data released Thursday. The DAX closed Wednesday trading down 0.1% while the Euro Stoxx 50 dropped 0.4%.
Corporate news in focus: There is no major corporate news scheduled today.
Economic data in focus: German Consumer Price Index (08:00 CET), French industrial production (08:45).
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.