U.S. Markets Eased After Oil Jumped to 10-month High

Barry Adams
05 Sep, 2023
New York City

Market indexes traded down on the first day of holiday-shortened week after oil prices rose. 

Market indexes were under pressure as investors debated the rate path amid growing evidence of global economic slowdown and the rise in oil price only raised worries of inflation rebound. 

Commodities prices traded down after China's service sector growth dropped to an eight-month low in August as new orders fell and exports declined. 

Business activity growth in the Euro Area declined in August to the lowest level since November 2020  as the weakness in the economy spread to the service sector. 

The moderate jobs expansion in the U.S. in August raised hopes that the Federal Reserve may avoid a recession and guide the economy into a soft landing amid resilient consumer spending and healthy  labor market. 

Despite the two jobs reports showing moderating labor market expansion, the report on core PCE index, an alternative measure of inflation, showed the stubborn nature of inflation. 

Investors are divided into two camps, one looking for the Fed to pause rate at its next meeting ending on Sep 20 and the other hoping for the Fed to lift rates one last time in the year. 

Investors are lowering the odds of a recession in 2023 amid moderating labor market expansion and weakening inflation. 

On the economic front, new orders for manufactured goods decreased 2.1% in July from the revised 2.1% increase in June, the U.S. Census Bureau reported Tuesday.  

 

U.S. Indexes & Yields 

The S&P 500 index traded down 0.02% to 4,500.56 and the Nasdaq Composite fell 0.02% to 14,031.06. 

The yield on 2-year Treasury notes decreased to 4.91%, 10-year Treasury notes inched higher to 4.23% and 30-year Treasury bonds edged down to 4.35%. 

Crude oil turned higher and reached a 10-month high after Saudi Arabia extended its voluntary one million barrels  a day production cut to the end of the year, according to a release by the Saudi Press Agency. 

Crude oil increased $0.64 to $86.57 a barrel and natural gas prices decreased 5 cents to $2.58 a thermal unit. 

 

U.S. Stock Movers 

Airbnb Inc jumped 6.3% to $140.81 after the S&P Dow Jones Indices announced Friday that the short term rental platform operator will be included in the S&P 500 index from Sep 18. 

Blackstone and Airbnb will replace Newell Brands and Deere & Company. 

Brady Corp soared 11.1% to $56.48 after the company posted quarterly results and reported adjusted earnings per share of $1.04. 

Warner Bros Discovery Inc decreased 0.5% to $11.52 after the company said that the current strikes from writers and actors could negatively impact adjusted operating earnings between $300 million and $500 million. 

The company provided the latest projections in a filing with the SEC. 

The movie studio operator is expecting lower adjusted operating earnings for the full year in the range of $10.5 to $11 billion, reflecting impact from strikes. 

The company revised higher its full-year free cash flow expectations to at least $5 billion and third quarter free cash flow of $1.7 billion, in part due to strong performance of Barbie. 

SoftBank controlled chip design firm Arm said it plans to list its stock on the New York Stock Exchange at a price between $47 and $51 a share, valuing the British company at $52 billion. 

SoftBank acquired the advanced chip design firm for $32 billion in 2016 and plans to sell 9.4% of the company and raise between $4.5 billion and $4.9 billion. 

 

 

European Markets Traded Near One-week Low 

European market indexes traded at a one-week low on global economic slowdown worries and future rate hike worries. 

Market indexes in London, Paris and Frankfurt eased after business activity growth weakened more in August as the manufacturing slowdown expanded to the service sector. 

HCOB's final Composite Purchasing Managers' Index declined to 46.7 in August from 48.6 in July, S&P Global reported today. 

The index dropped to the lowest level since November 2020 as service sector weakness added to the manufacturing sector. 

The U.K. services PMI fell to 49.50 from 51.50 in July, the lowest reading since January.

Producer prices in the Euro Area accelerated to a decline of 7.6% from a year ago in July from the 3.4% decrease in the previous month, the Eurostat reported Tuesday. 

The measure of wholesale prices declined for the third consecutive month and fell at the fastest pace since 2009, largely due to base effects after energy prices soared following Russia's invasion of Ukraine. 

Energy prices plunged 24.2% from the 16.4% in the previous month, while producer costs declined at a slower pace for intermediate goods. 

However, inflation slowed for industries producing capital goods to 4.7% from 5.3%, durable consumer goods to 5.1% from 5.9%, and non-durable consumer goods to 7.6% from 8.8%. 

On a monthly basis, producer prices in the Euro Area decreased 0.5%, the seventh monthly decline in a row, extending the 0.4% drop in the previous month.

 

Europe Indexes & Yields

European markets have been on the decline for the last five weeks on the worries of economic slowdown and higher interest rates that could dip the economy into a deeper recession. 

The DAX index decreased 0.3% to 15,771.71, the CAC-40 index fell 0.3% to 7,254.72 and the FTSE 100 index fell 0.2% to 7,437.93.

The yield on 10-year German bonds increased to 2.60%, French bonds traded higher to 3.12%, the UK gilts edged up to 4.49% and Italian bonds rose to 4.32%.

The euro edged lower to $1.070, the British pound to $1.255 and the U.S. dollar fetched 88.90 Swiss cents.

Brent crude decreased $0.87 to $89.87 a barrel and the Dutch TTF natural gas declined €0.88 to €34.45 per MWh.

 

Europe Stock Movers

Renault SA jumped 2% to €35.50 after the electric vehicle unit may be valued  as high as €10 billion in its initial public offering, chief executive Luca de Meo said. 

Ashtead Group decreased 2.7% to 5,322.0 pence after the UK-based equipment rental company lowered  its UK revenue outlook. 

Headlam Group Plc increased 2.7% to 224.84 pence after the floorcoverings distributor reported higher first-half revenue and reiterated its full-year revenue outlook.    

Luxury companies LVMH and Hermes  in Paris traded down between 1% and 2% on the worries of uneven economic recovery. 

China's service sector growth dropped to the lowest level in eight months after exports weakened and new orders growth slowed. 

Skanska AB increased 4.3% to kr 166.20 after the Swedish construction company won a $834 million highway improvement project in the U.S. 

ABN AMRO Bank NV increased 0.2% to €13.59 and the Dutch bank said it plans to appoint current interim chief financial officer Ferdinand Vaandrager permanently.