The stock market does not appreciate the healthy state of US employment

The world’s stock markets ended the day lower on Friday, driven mainly by a report showing strong employment momentum across the Atlantic, likely to delay the Fed’s rate cut. On the CAC 40, Kering shares rebounded, boosted by the creation of a new executive position, that of brand director, entrusted to Laurent Claquin.

The end of the week was rich in announcements likely to trigger reactions on the world’s stock markets.

However, Thursday’s announcement by the European Central Bank (ECB) of an interest rate cut (with the deposit rate reduced from 4% to 3.75%) did not shake things up. It was, however, the first rate cut in almost five years. But the news had been widely anticipated by financial markets in Europe and the US, which consequently reacted little. And this at a time when the ECB has also raised its inflation forecasts for 2024 and 2025…,

ECB President Christine Lagarde certainly hinted that disinflation was still “on the right track”, but did not indicate whether further rate easing was in the offing, citing a “data-dependent, meeting-by-meeting” approach. Even so, some experts are counting on two further easings between now and the end of the year, in September and December.

Employment and wage trends

In the meantime, most also believe that what investors “want” first today is to “understand the evolution of employment and wages in order to assess their impact on inflation and rates.”

The publication of the May employment report in the USA and, to a lesser extent, that of the third estimate of gross domestic product for the eurozone in the first quarter, were thus the focus of their attention.

The final eurozone GDP figures (+0.3%) for the first quarter confirmed a slight economic recovery, while the Bundesbank lowered its growth forecast (+0.3% instead of +0.4% anticipated in December) for Germany in 2024.

But it was above all the employment statistics for the US, published this Friday at 2.30 p.m., that were eagerly awaited. A slowdown in the labor market would have prompted the Fed (the US central bank) to cut interest rates in September….

However, this cut may well be postponed indefinitely in view of the strong US employment figures, which finally exceeded all forecasts.

A very dynamic US job market

Non-farm payrolls in the US finally reached 272,000, compared with the FactSet consensus of 180,000 (after 165,000 in April)! The unemployment rate was 4%, compared with the consensus of 3.9%. In May, average hourly earnings finally rose slightly more than expected (+0.4% or 4.1% year-on-year).

The day before, on Thursday, a larger-than-expected increase (+8,000) in US jobless claims was announced, the highest rate in a month. As a result, US Treasury yields ended Thursday at their lowest level in over two months.

Reserve

On Thursday, investors were cautious as they awaited the release of US employment data. The Dow Jones was the only stock to close slightly up (+0.20%), while the S&P-500 (-0.02%) and Nasdaq (0-.09%) stalled after setting records the previous day, boosted by technology stocks.

However, following publication of the report, the main US indices plunged more sharply: -0.3% for the S&P 500, -0.4% for the Dow Jones and -0.2% for the Nasdaq.

In Europe, by 10:35 GMT, the Paris CAC 40 was already losing 0.73%, Frankfurt’s Dax 0.78% and London’s FTSE 0.52%. The pan-European FTSEurofirst 300 index was down by 0.30%, the Eurozone EuroStoxx 50 by 0.48% and the Stoxx 600 by 0.28%.

In the aftermath of the European Central Bank’s announcements, however, some officials stressed the need for caution going forward, as inflationary pressures, particularly in terms of wages, were still present… European stock markets were also waiting with bated breath ahead of the publication of the US employment report.

European stock markets down…but not Kering!

Shortly after 3:30 p.m., the CAC 40 had fallen further (-0.86%), as had the Frankfurt Dax (-0.87%), the Eurozone EuroStoxx 50 (-0.54%) and the Stoxx 600 (-0.34%), while the London FTSE (-0.39%) and the pan-European FTSEurofirst 300 index (-0.17%) had eased slightly.

Among the various CAC 40 stocks, against this backdrop of a downward trend, Kering’s fine rise on Friday June 7 (+0.72% to 328.30 euros at mid-session) is particularly noteworthy. Even if it was still down by more than 18% since the beginning of 2024… The day before, the luxury group had made an announcement that was clearly appreciated by the stock market, namely the appointment of Laurent Claquin, President of Kering Americas since 2012, as Brand Director, effective July 1, 2024, and his integration into the Executive Committee. The creation of this new role “aims to strengthen the appeal of Kering’s institutional brand as well as increase the Group’s visibility and influence,” it explained in a statement.

Asian stock markets

On Friday, ahead of the Cac 40 due to time zone constraints, the main Asian stock markets were also down. The Nikkei index (Tokyo Stock Exchange) had lost 0.3% by the end of the session, and the Hang Seng (Hong Kong Stock Exchange), 0.4%.

In mainland China, the Chinese market was also dragged down (-0.5% for the CSI 300 index and -0.7% for the HSI) by fears over the country’s exports. According to the Wall Street Journal, a group of Republican lawmakers has called for a ban on sales to the United States by China’s leading battery companies, CATL, a Ford partner, and Gotion High-Tech, partly owned by Volkswagen. The reason? Alleged use of forced labor in their supply chains.

Currencies and oil prices

On the currency front, following the ECB’s announcements, the euro was up 0.02% at $1.0890 on Thursday. On Friday morning, the Japanese currency was also down 0.015% against its European counterpart at 0.006 euros.

On Friday morning, after an eight-week low, the dollar was still losing 0.02% against a basket of reference currencies.

In oil, the price of a barrel of Brent crude from the North Sea was up Friday by 20 cents to $80.07. The Nymex-listed July contract for light sweet crude (WTI) was up 22 cents at $75.77 a barrel.

According to analysts at Sevens Report Research, “oil’s stabilization must, however, be seen as fragile, as the oil market does not like uncertainties such as those that OPEC+ engendered with its decision on its production policy last weekend”. On Sunday, the members of the Organization of the Petroleum Exporting Countries and its allies (Opec+) decided to phase out their voluntary production cuts of 2.2 million barrels per day from the fourth quarter of this year…

Read also > [STOCK MARKET UPDATE] QUIET DAY ON THE PARIS BOURSE IN ANTICIPATION OF INFLATION FIGURES

Photos à la Une : © Presse