Market Commentary US stocks hit highs; China tech pares gains
• US stocks rose after fresh labour market data showed that the economic recovery remains on track; initial jobless claims came in at a pandemic low. The Dow Jones Industrial Average rose 0.4%. The S&P 500 added 0.3%, setting a record high. The Nasdaq Composite, which set its own record high, was up about 0.1% as large technology stocks extended their gains.
• Treasury yields have barely budged since Fed Chair Jerome Powell said the central bank could begin tapering its asset purchases this year. But that calm faces a test with tonight’s non-farm payrolls jobs data. The potential for volatility comes from the fact that when Fed officials gather for their policy meeting this month, they will release fresh projections for the Fed Funds Rate, the interest rate at which banks borrow and lend their reserves to each other. With the labour market pivotal for policy now, tonight’s report is seen as laying the foundation for these rate forecasts.
• Asian markets were mainly in the green but traded in a narrow range. Stocks were boosted by a move from the People’s Bank of China to provide RMB 300 billion (US$46.4 billion) of low-cost funds to banks for the purpose of lending to small- and medium-size companies, even as China’s crackdown on technology companies continued. China’s technology stocks did manage to notch a fourth day of gains in a rally that lost some steam after regulators stepped up their criticism of the nation’s ride-hailing giants. The Ministry of Transport summoned ride-hailing firms including Didi, Meituan and Alibaba‘s AMAP with an order to fix issues across data security, competition and labour practices by the end of the year.
• The Hang Seng Tech Index closed up 0.2%. The Shanghai Composite Index rose 0.8%, climbing for the fifth-straight session. Japan’s Nikkei Stock Average closed 0.3% higher, helped by gains in shares of chemical manufacturers. The gains were also supported by comments from a Bank of Japan board member who stressed the central bank’s readiness to ramp up stimulus if needed. The Straits Times Index edged up only slightly to close at 3,088.84.
• European equities edged back toward their recent record amid positive earnings reports. The Stoxx 600 Index was 0.3% higher as the health-care sector was lifted by Swedish Orphan Biovitrum AB, which soared 26% after private equity firm Advent International and Singapore wealth fund GIC agreed to buy the biotechnology firm.
US jobless claims
• US initial jobless claims fell to a pandemic low, dropping more than expected to 340,000 from the prior period’s 354,000. Continuing claims dipped to 2.7 million. Initial jobless claims represent new claimants for unemployment benefits, while continuing jobless claims are people who are continuing to receive benefits. After briefly exceeding 400,000 in mid-July, jobless claims have been trending near the lowest level since the pandemic began. That shows a rising number of cases and hospitalisations tied to the Delta variant of Covid-19 haven’t translated into increased layoffs. That may augur well for Friday’s data, which is forecast to show 725,000 jobs were added in July and the unemployment rate falling to 5.2% from 5.4%, according to Bloomberg Economics.