Japan’s leading indicators point to economic growth. Typhoon disrupted the work of the Hong Kong stock exchange

At Thursday’s close, the Dow Jones Index (US30) was down 0.54%, while the S&P 500 Index (US500) was down 0.30%. The NASDAQ Technology Index (US100) closed positive 0.25%. The S&P 500 index (US500) and the Dow Jones (US30) fell to 2-week lows. Signs of weakness in the US labor market added to concerns about the economy’s growth and negatively impacted stocks on Thursday after August ADP employment data showed employers added the fewest jobs in 3 years. Stocks also came under pressure after the ISM Services Business Activity Index for August unexpectedly rose.

Today, the US will release labor market data for August. Economists expect the US economy added 164,000 jobs in June after 114,000 in the previous month. The weaker-than-expected data for July caused turbulence in the market, instilling fears of a possible recession in the US. Therefore, any signs of a weakening labor market could revive fears about the prospect of a recession and cause further market turmoil. It should also be noted that historically, September and October can be volatile for stocks and indices. Such a scenario could hurt both the US dollar and stock indices. Typically, these instruments are in inverse correlation, but in this economic situation, they could fall in sync. A strong labor market report would indicate that the economy is moving toward a soft landing, which would be positive for the indices.

Equity markets in Europe were mostly declining yesterday. Germany’s DAX (DE40) decreased by 0.08%, France’s CAC 40 (FR40) closed down 0.92%, Spain’s IBEX 35 (ES35) was up 0.53%, and the UK’s FTSE 100 (UK100) closed down 0.34%. 

German industrial production fell by 2.4% month-on-month in July 2024, compared to market estimates of a 0.3% drop and following an upwardly revised 1.7% rise in the previous month. It was the third straight year-on-year decline. Germany’s trade surplus narrowed to €16.8 billion in July 2024 from €20.4 billion in June, well below estimates of €21 billion. It was the smallest trade surplus since December 2022, as exports rose less than imports.

WTI crude futures were trading around $69.4 a barrel on Friday and could fall sharply over the week due to demand concerns in major oil markets. Recent data from China and the US showed weakness in the manufacturing sectors, adding to concerns about slowing demand. In addition, a potential increase in oil supplies from Libya put downward pressure after signals that political factions in Libya are close to an agreement. However, some relief came from an unexpectedly large decline in US crude oil inventories. EIA data showed that US crude inventories fell by 6.9 million barrels last week, well above market expectations of a 1.1 million barrel decline, marking the ninth consecutive decline in crude inventories in the last ten months.

Asian markets were predominantly down yesterday. Japan’s Nikkei 225 (JP225) decreased by 1.05%, China’s FTSE China A50 (CHA50) added 0.01%, Hong Kong’s Hang Seng (HK50) was down 0.07%, and Australia’s ASX 200 (AU200) was positive 0.40%. 

Hong Kong’s stock market was closed on Friday after super typhoon Yagi. The Weather Bureau declared the third alert level on Thursday night, and it may remain in effect until noon local time. At the same time, that said that if alert level number 8 is downgraded in the afternoon, there will be no trading during the day. 

Japan’s Leading Economic Index indicators, which are used to gauge the economic outlook several months ahead on data such as job offers and consumer sentiment, rose to 109.5 in July 2024 from a marginally revised 109.1. The rebound came on the back of growth in the services sector in July, while consumer confidence improved to its highest level in three months. This is positive data for the Bank of Japan’s tightening policy.