Stocks shrug off jobs data, US-China tension

Wall Street brushed off data released on Friday showing the US economy adding jobs as US-Chinese tensions mount and a standoff over fresh stimulus continues.

The monthly US non-farm payrolls market report had been eagerly awaited as the first important indication of how a recent surge in infections that has sparked a second round of business closures has affected the economy.

The report showed that the US economy added 1.8 million jobs in July, far fewer than in May and June, but more than economists had been expecting.

The unemployment rate fell to 10.2 per cent from 11.1 per cent, also better than consensus expectations.

However that still leaves the unemployment rate at slightly worse than the depth of the global financial crisis in October 2009 and less than half the 22 million payroll jobs lost during the pandemic have been regained.

The employment report “can fairly be labeled better than feared,” said Briefing.com analyst Patrick J. O’Hare.

For David Madden at CMC Markets UK, “now that the jobs report is out of the way, dealers will turn their attention back to China, and the squabbling over the coronavirus stimulus plan at home.” Wall Street opened lower and the three main indices remained there approaching midday.

They followed Asian stock markets which had moved down on a new China-US political flare-up after President Donald Trump signed an executive order barring US residents from doing any business with the Chinese parent companies of social media platforms TikTok and WeChat, citing national security concerns.

The move, which comes into force next month, is the latest salvo in a tech stand-off between the superpowers and adds to a laundry list of issues they have butted heads over in recent months, including Hong Kong, Huawei and the coronavirus. Shares in WeChat parent Tencent sank 10 per cent at one point in Hong Kong before ending down almost six per cent.

The latest tensions overshadowed data showing a surprise jump in Chinese exports for July.

The mood on Wall Street has also been soured by US lawmakers’ slow negotiations on new economic stimulus against a backdrop of surging virus infections.

The US dollar bounced on Friday after US job growth for July surpassed low expectations but still showed a sharp decline from June, while investors kept an eye on ongoing stimulus talks in Washington. The US labour Department’s report showed nonfarm payrolls increased by 1.76 million in July. While that was better than the 1.6 million economists surveyed by Reuters had forecast, it was still sharply lower than the record 4.8 million in June. The dollar index, which measures the dollar against a basket of currencies, rose in the wake of the report and hit its highest in three days. It was last up 0.6% at 93.419.  The euro has retreated from recent highs, and was last down 0.8% at $1.1785, while the British pound also fell 0.8% to $1.3042. The risk-sensitive Australian dollar fell, hurt by concerns about worsening US-Chinese relations and the Reserve Bank of Australia’s downbeat assessment of the local economy. It was last down 0.8% at 0.7175.

European shares closed higher on Friday, marking weekly gains as investors focused on a broadly supportive earnings season and improving economic data in Europe rather than rising US-China tensions.

The main indexes spent the morning in the red after US President Donald Trump moved to ban US transactions with the Chinese owners of messaging app WeChat and video-sharing app TikTok, further escalating friction with Beijing.

Amsterdam-listed Prosus, with its biggest investment in Tencent, fell 4.0%.

Markets, however, stabilised later, boosted by telecoms, technology and healthcare stocks. The pan-European STOXX 600 index, up 0.3%, closed out with weekly gains of 2%. German stocks rose 0.7%, while London’s FTSE 100 and France’s CAC 40 were flat, but all logged weekly rises.

 Refinitiv data showed about 60% of the STOXX companies that have reported so far beat estimates.

Hikma Pharmaceuticals jumped 10.9% after saying it had started manufacturing remdesivir, an approved treatment for COVID-19 from US-based Gilead, and it raised its annual sales outlook for two of its biggest divisions. Deutsche Telekom, which owns 43% of T-Mobile, rose 2.7% after the US firm added more monthly subscribers than expected in the second quarter and said it surpassed rival AT&T. The broader telecoms index rose 1% to lead sectoral gains, although stocks considered more sensitive to business cycles, including banks, miners and oil and gas companies, handed back some of this week’s steady gains.

Agencies