US Equities ended the week on a high after the Non-Farm Payrolls numbers on Friday came in better than expected. The US economy added 943k jobs in July (ahead of expectations of 870k). June's job count was also revised higher from 850k to 938k. The unemployment rate fell to 5.4% (vs expectations of 5.7% and 5.9% earlier) following a strong showing in the weekly jobless numbers. Despite this and a strong ISM showing earlier in the week, US equities underperformed their counterparts in Europe and Asia with the SPX gaining close to a percentage point on the week. This could be due to the step-up in taper talk by the Fed - where a strong labor market and economic recovery, in general, have led to indications that asset purchases could be scaled back starting in Q4 this year, though no firm timetable has been established.
China and HK equities were able to stem the decline from the past month and close higher over the week, but the spectre of regulatory action by the state still looms large over market sentiment. Chinese debt has been mixed with EM sentiment buoyant overall (despite a stronger dollar). Huarong, the distressed asset manager whose debt sold off earlier in the year, is trading up again as news of the restructuring comes through. China's real estate sector is still depressed though with Evergrande (once considered too big to fail) continuing to be the worst hit. News of court proceedings and another double downgrade by S&P to CCC have seen a pickup in short interest here as the debt trades close to distressed levels.Crypto has had a stellar week (& weekend) with Bitcoin topping 45k and Ethereum trading above 3k before falling back a little. After a tough couple of months, technical indicators are turning green here once again. Crude was lower on the week as US inventories came in higher than expected. Precious metals fell quite a bit owing to a stronger dollar and increased expectations of the Fed tapering. The US yield curve moved higher with the 10-year yield back to 1.3% now. The steepening of the curve is indicative of positive economic sentiment.We're light on the economic data this week, price action could be determined more by the passage of the US stimulus bill in the Senate and Fed speakers.
August 9, 2021
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