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Investors bet slower hiring in the US may delay a tapering of Fed stimulus

Chief Investment Office, Newsfeed 7 Sep 2021

US

Global stocks rose for a seventh day and US equity index futures rallied as investors bet slower hiring in the world’s largest economy may delay a tapering of Federal Reserve stimulus. Aluminium hit a decade high amid political unrest in Guinea.

MSCI’s gauge of world stocks gained for a fourth day even as US markets were closed for Labor Day. In Europe, the Stoxx Europe 600 Index rose the most in six weeks, led by technology shares. Contracts on the S&P 500 Index climbed 0.2%. Aluminium supplier Norsk Hydro ASA jumped to a 13-year high in Oslo. Gold bounced between losses and a gain of 1.9%.

The latest US jobs report threw traders’ calculations awry after they braced for an announcement of tapering at the Fed’s September meeting. The world’s largest economy added only 235,000 jobs in August – the smallest gain in seven months – boosting chances of a delay in that announcement.

Aluminium hit the highest in over a decade as political unrest in Guinea fuelled concerns over supply of the raw material needed to make the metal. A unit of the military seized power and suspended the constitution, raising the possibility of disruption to bauxite shipment from the key global supplier. – Bloomberg News.

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EUROPE

European equities rose on Monday (6 September), boosted by optimism that curbs to central bank stimulus will be delayed, while traders focused on new additions to Germany’s benchmark.

The Stoxx 600 Index ended 0.69% higher at 475.19, within 0.1% of a record high reached in mid-August, though a closed US market saw thinner volumes than usual. Germany’s DAX Index advanced 1% after gaining new members Zalando and HelloFresh as part of a revamp of the benchmark.

European stocks are trading within a whisker of a recent record level as attention turns to the outlook for stimulus. A macro strategist said that prospects of a delay to tapering by the US Federal Reserve were supporting equity markets, a sentiment he expects to persist.

On Monday, the region’s equities were bolstered by the technology sector as shares in heavyweight Prosus rose and TeamViewer and Nordic Semiconductor also rallied. Separately, Norsk Hydro jumped 3.4% amid a spike in aluminium prices, while an earnings update and an analyst downgrade weighed on Dechra Pharmaceuticals, which fell 3.3%.

Thursday’s European Central Bank decision will be a key focus for investors, with recent hawkish comments from some speakers prompting concerns that it could be looking to pare back its support measures.

Despite these worries, strategists remain positive on the direction of global equities, recommending investors keep using any periods of weakness to add risk. – Bloomberg News.

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JAPAN

Japan equities rose, with the Topix Index extending gains to a more than 30-year high, on optimism for new economic policies following the announcement that Prime Minister Yoshihide Suga will step down.

Electronics makers gave the biggest boost to the Topix, which advanced 1.3% to the highest level since August 1990. Telcos jumped as investors hoped that the next prime minister will have more favourable policies on mobile phone bills. Fast Retailing and Tokyo Electron were the largest contributors to a 1.83% gain in the Nikkei 225 Stock Index on Monday (6 September). The index opened 1.00% higher at 29,956.50 on Tuesday.

Animal spirits among Japan stock traders have been rekindled after Friday’s news of the resignation of Suga, who has slumped in the polls amid perceptions of the government’s mishandling of the pandemic.

Suga’s strategy of light virus restrictions for prolonged periods of time has stretched the patience of consumers and business owners and done little to lower infection rates. While government and central bank measures have minimised the economic impact, there is no end in sight for the emergency policy measures.

Japan is preparing to extend its current state of emergency order by around two weeks for Tokyo and three surrounding prefectures, the Mainichi newspaper reported Saturday.

The Topix is up 13% this year, far outpacing a gauge of Asian stocks amid Bejing’s recent regulatory crackdowns but trailing the nearly 21% gain in the S&P 500 Index. – Bloomberg News.