US Indices Dash Global Hopes Of Quick Revival
The disappointing jobs data has led to reduced expectations of an early tapering by the Federal Reserve
The US benchmark indices Dow Jones, S & P 500 and Nasdaq ended the fortnight in the red territory, losing 2.22 per cent, 2.26 per cent and 2.08 per cent, respectively. The US economy managed to create only 235,000 non-farm payroll jobs in August as compared to economist’s forecast of 728,000 jobs. This was the fewest in seven months as hiring in the hospitality and leisure sectors was stalled. The disappointing jobs data has led to reduced expectations of an early tapering by the Federal Reserve. Industrial production in the US increased 0.4 per cent in August.
The production by US factories, utilities and mines in August has surpassed the pre-pandemic levels. As per data from the US Department of Labor, the Producer Price Index rose 0.7 per cent in August. The Core Producer Price Index, which excludes volatile energy and energy prices, rose 0.3 per cent in August, which is down from a 0.9 per cent gain in the preceding month. Overall, producer prices are up by 8.3 per cent in August from the previous year and up from 7.8 per cent in the prior month. This happens to be the largest gain since the data was first collected in November 2010.
In essence, inflation in the US continues to persist reasonably above the Federal Reserve’s target and in the wake of the corona virus pandemic producers are struggling with transportation woes, shortages and bottlenecks. These factors could keep putting upward pressure on wholesale prices. German and French stock market benchmark indices DAX and CAC 40 contracted by 1.84 per cent and 1.79 per cent, respectively. Similarly, London’s FTSE 100 also fell by 2.45 per cent. The European Central Bank in their latest meeting decided to keep the monetary policy unchanged; however, they will slow down the bond-buying programme launched to keep the economy afloat during the pandemic.
China’s retail sales grew by a poor 2.5 per cent on an annual basis in August which was well below expectations as the country managed to cope with the worst outbreak of corona virus since its initial spread in early 2020.
Industrial production was up by 5.3 per cent in August and failed to meet market expectations. Hong Kong’s Hang Seng index was the top loser and fell by 3.79 per cent while Shanghai index ended in the green, up by 0.90 per cent. Japan’s Nikkei index extended the bull run by climbing a whopping 4.71 per cent during the fortnight on hopes the ruling Liberal Democratic Party might compile additional economic stimulus and comfortably win the upcoming general elections after the country’s current Prime Minister Yoshihide Suga announced his decision to not seek re-election. According to S & P Global ratings, global corporate capital expenditure is expected to jump by 13 per cent in the current year with growth in all regions and across sectors, especially in semiconductors, software, retail and transportation.