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LGT Navigator: Weak US labor market report disappoints, but defuses interest rate worries

May 10, 2021

The US jobs statistics published on Friday disappointed high expectations, but at the same time defused the fears of many stock market players about rising interest rates. While reactions on the stock markets were limited, the US dollar came under pressure across the board. At least the weak labor market report is likely to have contributed to a certain calming of interest rate worries, which have been growing in strength recently.

Weak US labor market report disappoints, but defuses interest rate worries

The American employment report fell far short of expectations on capital markets and for the time being dampened optimism about a rapid recovery from negative effects of the corona crisis. On the New York Stock Exchange, however, the weak labor market statistics did not go down badly, as they provided some relief from inflation and interest rate worries about an overly rapid economic recovery. Against the background of only weak job growth in April, an imminent tightening of monetary policy by the Federal Reserve is no longer an issue for now. The Dow Jones Industrial reached a record high for the third day in a row on Friday, gaining +0.66% to 34'777.76 points by the close of trading. In the weekly balance, the leading index thus achieved a plus of about +2.7%. The S&P 500 also reached record levels again and closed +0.74% higher at 4'232.60 points. On the Nasdaq technology exchange, the indices rose by about +0.8%, but showed a minus of about -1% for the week.

On Asia's stock exchanges, the positive trend continued for the most part and for the stock markets in Europe, the futures signal a friendly start to the week. While in the US the corporate earnings season is practically over, in Europe, in this holiday-shortened week, some important quarterly results of blue chips are still pending. Today, the Covid-19 vaccine pioneer BioNTech reports and in the next few days, among others, E.ON on Tuesday, Bayer, Allianz, Deutsche Telekom and Merck on Wednesday.

US labor market recovery tougher than expected

In April, 266'000 new jobs were created in the US, with employment growth far below market expectations. Analysts had expected an increase of nearly one million new jobs. Job growth slowed particularly in the service sector, where significantly fewer jobs were created last month than in the months before. At the same time, the unemployment rate, calculated in a separate survey, increased to 6.1% from 6.0%. Economists had forecast a decline to 5.8%. On the other hand, wages rose much more strongly. Average hourly wages rose +0.7% month-to-month, after falling -0.1% in March – a trend that could fuel inflation.

More than 250 million vaccinations in the US

Since the start of the vaccination campaign, the US has already managed to administer 252 million doses of Covid-19 vaccines. This means that, according to the US health authority CDC, around 57% of all adults have now been vaccinated at least once and 42% have already been fully vaccinated. The US government under President Joe Biden can thus claim demonstrable success in the fight against the pandemic. However, the results for the US remain bleak: to date, more than 32.6 million people have been infected with Sars-CoV-2 and around 580'000 people have died from the lung disease.

Copper price equals record high of 2011

The price of copper, seen by economists as an indicator of trends in the global economy, climbed to a new high of around USD 10'232 in London on Friday, surpassing the previous record set in 2011. Copper has already risen by more than +30% this year, indicating strong demand amid the anticipated global economic recovery. In addition, problems in the supply chains against the backdrop of the corona crisis are causing delivery delays, which makes the raw material even more sought-after.

Economic Indicators May 10

MEZ Land Indikator Letzte Periode
10:30 EZ Sentix Economic Outlook (May) +13.1

Earnings Calender May 10

Land Unternehmen Periode
GE BioNTech Q1

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

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