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LGT Navigator: Boom on the US labor market fuels stock market rally

August 9, 2021

The US labor market report in July was better than expected. The focus will now shift to the economic symposium in Jackson Hole at the end of August, when investors are hoping for indications of the future monetary policy course of the Federal Reserve. In China, the economic momentum is cooling, as the latest export figures show.


The strong US labor market report on Friday pushed Wall Street to new record highs. The S&P 500 gained +0.2% to 4436.52 points and the Dow Jones Industrial advanced +0.4% to 35’208.51 points. However, the Nasdaq Composite lost -0.4% to 14'835.76 points. 

The Asian stock exchanges start on Monday with gains into the new week. In Tokyo, the Nikkei gains +0.3% and in Hong Kong, the Hang Seng climbs +0.6%. The Shanghai Composite trades +1% firmer.

Chinese economic momentum cools down

The economic momentum in China is weakening, as recent data show. Although exports in July grew strongly year-on-year by +19.3%, analysts had expected an even larger increase. In addition, the momentum has slowed significantly, as exports had increased by +32.2% in June. At +28.1%, imports also fell short of expectations in July (June: +36.7%). Exports continue to be supported by rising demand from the industrialized countries. On the other hand, higher raw material and freight costs as well as logistical problems are slowing down foreign trade. At the beginning of the month, the Caixin Purchasing Managers' Index already signaled that economic growth is weakening. China is currently battling the renewed spread of the coronavirus. Authorities have therefore imposed local lockdowns and travel restrictions.

Boom on the US labor market

The US labor market is in great shape. This was shown on Friday by the labor market report for July, published by the Bureau of Labor Statistics BLS. According to the report, the US economy has created +943’000 new jobs, which is the largest increase since August 2020. Analysts had expected an average increase of +860’000. In addition, +119’000 more jobs were created in May and June than previously thought. In particular, the leisure and hospitality sectors added workers in July after hotels and restaurants reopened their businesses (+380’000). The unemployment rate, collected in a separate survey, fell to 5.4% from 5.9% in June, noting the lowest level since March 2020. In April 2020 it had surged to 14.8% after strict measures to contain the corona pandemic shut down economic life. Workers can also look forward to higher wages. Average hourly wages were up +0.4% month-on-month, and +4% year-on-year.

The big question now will be how the Federal Reserve assesses the latest labor market data. At last week's FOMC meeting, the Fed declared that the recovery of the US economy was well on track. However, Fed Chairman Jerome Powell also stressed that he wanted to see more strong figures from the job market before a change in monetary policy was under discussion. The focus now shifts to the symposium in Jackson Hole, where the economic elite will meet and which will take place from August 26 to 28. After being held virtually last year, the meeting is to be held again physically this year on a smaller scale. In the past, US central bankers have already used the platform to announce changes in monetary policy.

Industrial production in Germany falls

Industrial production in Germany fell surprisingly in June. Thus, compared to the previous month -1.3% fewer goods were produced, announced the Federal Statistical Office. This, after already in May a decrease of -0.8% resulted. Analysts had expected a recovery in production. The figures were also disappointing in a year-on-year comparison. Although industry increased output by +5.1%, economists had forecast an average increase of +7.9%. 


Economic Indicators August 9

03:30 China Consumer price index (m/m, July) -0.4%
07:45 CH Unemployment rate (July) 2.8%


Earnings Calender August 9

Country Company Period
US Barrick Gold Q2


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