Jarden Brief: US data shows jobs market slowing down

There are fewer jobs being created in the US than initially anticipated. Photo / Getty Images

Keeping you up to date with the latest market moves, in association with Investment firm Jarden

New Zealand:

The NZX 50 performed well on Wednesday, closing 0.8 per cent higher.
All sectors apart from financials (-0.4 per cent) traded in the green, with consumer non-cyclicals and real estate increasing by 1.5 and 1.2 per cent, respectively.

Outdoor retailer, Kathmandu, gained the most by market close, improving 2.9 per cent, recovering the losses made at the end of last week.

Infrastructure investment company, Infratil, also performed well, rising 2.2 per cent. The market reacted positively upon Infratil announcing the completion of sale of its 65.2 per cent stake in Tilt Renewables on Tuesday. The gross proceeds of the deal were $1.98 billion.

Lastly, agribusiness, Scales Corporation, made it onto the leader board, up 2.0 per cent. The company confirmed that it will release its interim results for the six months ending 30 June 2021 prior to market opening on 25 August 2021.

The worst performer of the day was telecommunications infrastructure company, Chorus, decreasing by 1.3 per cent, reversing half of its gains made at the beginning of the week.
Air New Zealand also traded in the red, declining 0.7 per cent. The airline gave new earnings guidance for the 2022 financial year, as the impact of the border closure to Australia will cause higher than previously expected losses for the firm. The new guidance states a loss of $530 million for the financial year 2022, up from a $450 million loss announced in mid-June.

Rounding out the underperformers was leisure and entertainment company, Skycity Entertainment Group, down 0.6 per cent.

Yesterday, Statistics New Zealand published the latest unemployment and underutilisation numbers. The results took the market by surprise, as the unemployment rate fell to 4.0 per cent, down from 4.6 per cent at the end of March. This was a steeper decline than expected by economists. The number of people classified as underutilised dropped by 48,000 to 315,000, a record drop since the inception of the measure in 2004.

This applies pressure to an already tight labour market, leading to increased labour costs. This overheating economy could be cooled off by an increase in the official cash rate by the Reserve Bank, which some of New Zealand's biggest banks expect to happen as early as the end of this month.

International Markets:
US:

The major US indices were a mixed bag this morning. The S&P 500 was trading down 0.2 per cent, the DJIA had decreased by 0.7 per cent, and the NASDAQ was up 0.3 per cent again.

The ADA private payroll survey for the US showed private companies added 330,000 jobs in July, well short of the 653,000 estimate. Job creation has fallen as Covid-19 fears continue to present downside risk.

Eight of eleven sectors declined. Communication services and technology were outperformers, each rising 0.4 per cent. Energy and consumer staples were the worst performing sectors, falling 2.9 and 1.2 per cent, respectively.

Paycom Software rose 10.5 per cent. The company, which provides cloud-based human capital management software, has recently experienced upgraded analyst expectations.
Moderna was a top performer again today, reaching a new 52-week high. This comes in anticipation of the Covid-19 vaccine producers second quarter earnings announcement tomorrow. High vaccine demand, the concerns around the Covid-19 Delta variant and the potential heightened demand for booster vaccines has all contributed to what is expected to be a strong second quarter performance for Moderna.

Communications company, Lumen Technologies, fell 10.6 per cent. In the second quarter earnings announcement, while earnings per share rose 23.1 per cent from the second quarter last year (US$0.41 to US$0.48), EBITDA declined by 1.2 per cent.

Another underperformer was significant player, General Motors, which also disappointed on its second quarter results release, down 9.0 per cent. Quarterly earnings were reduced by US$1.3 billion in warranty recall costs. Earnings per share were US$1.97, compared to an expected US$2.23.

Rest of the World Markets:

The Nikkei traded down 0.2 per cent, the Hang Seng up 0.9 per cent and the Shanghai Composite rose by 0.9 per cent.

Commodities

Gold was trading flat at US$1,814.40 per ounce.

Oil was trading lower again, down 3.2 per cent to US$68.31 per barrel.

Cryptocurrencies flushed green this morning. Bitcoin had increased 3.7 per cent and Ethereum had risen 7.6 per cent at the time of writing, recovering from yesterday's declines.

Finally, the US 10-year treasury bond rate was yielding 1.18 per cent.

Australian Markets:

The ASX rose 0.4 per cent to close at a new record high, breaching the 7,500 mark for the first time in its history. The gain was mostly driven by a bullish Wall Street rally the night before.

Materials rebounded to climb 1.2 per cent, with BHP Group (+2.1 per cent), Rio Tinto (+1.5 per cent) and Fortescue Metals (+0.4 per cent) leading the way.

Energy stocks also performed well, with Woodside Petroleum climbing 1.0 per cent to A$22.04 after investors shrugged off an increase in its cost estimate for a project.
On the other hand, healthcare stocks tumbled 0.5 per cent with index heavyweight CSL falling 0.7 per cent.

Retail trade numbers for June were released by the Australian Bureau of Statistics yesterday which highlighted a 15.7 per cent uplift for footwear and a 6.8 per cent uplift for clothing - although liquor sales fell by 10.1 per cent. The result could be considered a positive sign for the dual-listed Kathmandu or City Chic Collective. The decline in liquor sales might be marginally negative for stocks exposed to the industry such as Wesfarmers, or the recently spun-out Endeavour. It is also worth noting that the decrease was in comparison to a busy June 2020 - during which liquor sales soared as Australians were locked down.

Capital market transactions continue to be hot, with Peak Resources looking to raise A$29 million to fund a Tanzanian rare earths project. The project will aim to convert earth resources from Tanzania into neodymium praseodymium oxide, a compound used in manufacturing electric vehicles, wind turbines and smart phones.

Meanwhile, buy-now- pay-later provider, BizPay, seems to be looking to use the buzz from the AfterPay-Square deal announced on Monday as a springboard for its own capital raise. The company is the only buy=now-pay-later business which targets business-to-business transactions, allowing companies to pay invoices in a staged manner. Media reports have rumoured that the potential IPO could be at around a A$400 million market capitalisation.

• For more information on the latest market moves, get in touch with Jarden.

Disclaimer: This Morning Brief has been prepared in good faith and reflects opinions and views at the time of publication, using external sources, systems and other data and information we believe to be accurate, complete and reliable at the time of preparation. We make no representation or warranty as to the accuracy, correctness and completeness of that information, and will not be liable or responsible for any error or omission. This Morning Brief is not to be relied upon as a basis for making any investment decision. Please seek specific investment advice before making any investment decision. Jarden Securities Limited is an NZX Firm, a broker disclosure statement is available free of charge at www.jarden.co.nz. Jarden is not a registered bank in New Zealand. Full disclaimer available at: https://www.jarden.co.nz/limitations-and-disclaimera>