Sharemarkets mostly started February on a weakish note compared to the solid start to the year in January.
On Friday Wall Street closed mostly higher on the Dow and S&P 500, but Nasdaq eased. Eurozone shares rose 0.2% on Friday and ASX 200 futures rose 20 points or 0.3% pointing to a positive start to trade for the Australian share market later today. The ASX 200 was down 1.9 points on Friday.
The Dow rose 64.22 points, or 0.3%, to end at 25,063.89, up 1.3% for the week. The S&P 500 index added 2.43 points to 2,706.53, to be up 1.6% for the week. The Nasdaq lost 17.87 points, or 0.3%, to close at 7,263.87 but added 1.4% for the week.
For the Dow, it was the sixth positive week in a row, the longest since November 2017 when the blue-chip index advanced for eight weeks in a row.
Chinese shares rose 2%, but markets there and in other parts of Asia will be shut this week (for all or part of the five days) for the Lunar New Year. Japanese shares edged up by 0.1% last week but the ASX fell 0.7% due the weakness in the bank shares ahead of the release later today of the final report of the banking royal commission.
That offset a strong week for the mining and energy sectors locally as oil prices rose and iron ore prices soared in the wake of the terrible mine disaster in Brazil (the second in three years at a Vale mine) that has killed more than 100 people and left close to 300 missing.
Wall Street was left in something of a quandary.
The Federal Reserve’s decision to put a halt on rate rises (the central bank says it will now be ‘patient” about the level of rates) on Wednesday was challenged by the unexpectedly strong jobs report for January.
The report showed that 304,000 new jobs were created in January, well above the market estimates around 165,000 to 172,000. At the same time, job growth for December was reduced by 90,000, somewhat blunting the impact of the headline number. Even after that revision to December’s number, job gains over the past three months have averaged 241,000.
The figures show that there was only muted effect on the jobs market by the recent government shutdown, though the unemployment rate edged up to 4% from 3.9%, partially as a result of federal workers not being paid for much of January (something that was not unexpected).
Average earnings increased 3.2% year-on-year in January, according to the jobs report, down from an upwardly revised 3.3% in December — still around the fastest rate in a decade.
The report showed new jobs were spread across a wide range of industries, including leisure and hospitality, construction, healthcare, and transportation and warehousing.
The labour force participation rate, which includes those looking for work as well as in a job, edged higher to 63.2% (Australia’s rate is 65.6% and our jobless rate is 5.0%).
So although the Fed is now in ‘patient’ mode, economists wonder what another solid jobs report for February in a month’s time might do to that stance. Inflation remains weak, at just under the 2% target range for the US central bank.
So there is no need for any action on rates because at the moment the US has solid jobs growth, solid wages growth and there’s no sign of an upturn in inflation.
