According to the ADP survey results, the lowest employment growth in the US since March once again fueled hopes that the Federal Reserve could refrain from further tightening monetary policy for the time being. Nevertheless, the recent recovery on the stock markets petered out in the middle of the week. In Asia, the stock markets trended inconsistently on Thursday, while the purchasing managers' index for China's industrial sector in August signaled a contraction for the fifth month in a row. Also in focus today is UBS, which reported a record profit in the second quarter backed by Credit Suisse related "goodwill".
In the US, the monthly report from private employment services provider ADP showed a sharp slowdown in job growth in the American private sector. According to the report, 177,000 new jobs were created in August, compared with a consensus expectation of 195,000 jobs. As recently as the previous month, revised job growth was 371,000 (initial calculation 324,000). Thus, while the pace has slowed, the US labour market continues to make a solid impression. ADP commented that after two years of exceptional gains, the labor market is now returning to more sustainable wage and employment growth. Further insight will be provided by the official labor market statistics from Washington due on Friday.
On Wall Street, investors held back again after a three-day rally series in the middle of the week. The Dow Jones Industrial went out of trading with a moderate gain of 0.11% at 34,890.24 points and the S&P 500 gained 0.38% to 4,514.87 points. On the Nasdaq, the indices gained about 0.5%. Technology stocks continued to benefit from the hope of another interest rate pause by the US Federal Reserve. In the bond market, the yield on ten-year US government bonds remained just above 4.1%.
The markets in the Asia-Pacific region were mixed. The focus here was on the renewed decline in manufacturing activity in China. The official Purchasing Managers' Index for the manufacturing sector (PMI) was at 49.7 points in August for the fifth month in a row below the growth threshold of 50 points. In Hong Kong, the Hang Seng index slipped 0.2%, giving back earlier gains. On the Chinese mainland, stock indices also traded in the red - the CSI 300 Index fell by 0.6%. In Tokyo, the Nikkei 225 also fell by 0.6% and the South Korean Kospi traded 0.4% lower.
In focus this morning is UBS. The major Swiss bank posted a record second-quarter profit of USD 28.9 billion, thanks in large part to billions of dollars in "goodwill" following its acquisition of Credit Suisse. Adjusted for the effects of the acquisition, pre-tax profit was USD 1.1 billion. UBS had USD 5,530 billion in assets under management at the end of June, compared with USD 4,184 billion before the Credit Suisse takeover. The bank was optimistic about the future course of business. The Swiss business of the acquired Credit Suisse is now to be fully integrated and is expected to be completed in 2025.
Inflation in Germany again cooled somewhat in August. Over the year, consumer prices rose by 6.1% after 6.2% in July and 6.4% in June. Inflationary pressure remains high for food (+9%) and energy (+8.3%). Today, we expect inflation data from the eurozone, which should then be crucial for the ECB's next interest rate decision on September 14. At the central bank symposium in Jackson Hole, ECB President Christine Lagarde did not show her cards and kept all options open.
Corporate news in focus: UBS Q2 figures, Pernod Ricard annual figures and Broadcom with Q3 figures.
Economic data in focus: Germany retail sales July (08:00), Switzerland retail sales July (08:30), France GDP Q2 and consumer prices August (08:45), Austria GDP Q2 (09:00), Germany unemployment figures August (09:55), Italy unemployment rate July (10: 00) and consumer prices August (11:00), Eurozone consumer prices August and unemployment rate July (11:00), U.S. initial jobless claims (weekly) and personal income and spending July (14:30), Chicago purchasing managers index August (15:45).
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.