The German DAX was able to profit from the great reports released by the Labor Department. The reports were a catalyst for a weaker EURUSD which fueled investments in the German Index. 2 hours before close the DAX is up 0,75% at the 12247 points mark. The German Index was able to make a 100 point jump thanks to the big jump in Daimler. Daimler was able to increase sales of cars by 12,1 in July.
As per recent sessions, the chief influences were second-quarter earnings. And as before, the profit tide was strong and supportive, although there were some outliers among the companies issuing their releases, including MetLife, Inc., the giant insurer. That stock fell back some 3% after posting results on Wednesday. Overall, though, the reporting season has been a good one, with some three-quarters of the companies in the S&P 500 exceeding their bottom-line consensus views. That is helping to counter the choppy economic news we have been seeing on occasion. On this count, the Institute for Supply Management reported that its non-manufacturing survey had slowed down in July, registering a well-below consensus expansion rate of 53.9. Expectations had been for a tally of 57.0. In June, this survey had come in at 57.4. Breaking this report down, we see that July’s results were headlined by slower rates of growth in new orders, employment, supplier deliveries, backlogs, and exports. One category, pricing, rose strongly in July, however, as it had in the companion manufacturing survey released on Tuesday. Still, this report, disappointing as it was, didn’t shake Wall Street, as the initial pause in the Dow’s rally was brief. So, as we moved into late morning, that composite strengthened a bit further, although the other indexes remained under water. As we moved into the first part of the afternoon, the market steadied, but the Dow again started to move in and out of the black. The other indexes retained their losses, as selective profit taking persisted. As before, most of the 10 leading equity sectors were lower, but just marginally so, while losing issues held a modest lead over gaining stocks on both the Big Board and the NASDAQ. Things changed little as we moved into and through the latter stages of the afternoon, as most investors’ eyes were focused on the just-released Labor Department report on non-farm payrolls and the unemployment rate (see below). That posting can be a game changer if there is a major departure from expectations. That said, the Dow did firm somewhat for a time, before weakening again into the close. So, when the final tallies were in, we saw that this index had set another record high, while rising a modest 10 points on the day. Losses were spread across the other large and small composites, however.
Royal Bank of Scotland swung to a profit in the second quarter as the taxpayer-owned lender reduced charges for past misdeeds. RBS, bailed out by the British government during the 2008 financial crisis, said Friday that net income totaled 680 million pounds ($894 million) after a loss of 1.08 billion pounds in the same period last year .Adjusted operating profit, which excludes litigation and restructuring costs, more than doubled to 1.69 billion pounds as RBS increased lending, cut spending and reduced the amount of money it set aside for bad loans. “We see the first six months of this year as proof of the investment case for this bank: our path to sustainable profitability is becoming clearer and closer and we have resolved some of the most significant issues this bank faced,” CEO Ross McEwan said in a statement. RBS also said its NatWest Markets unit has carried out contingency planning for Britain’s looming departure from the European Union by ensuring that the bank’s license ithe Netherlands is valid. Depending on the outcome of Britain’s negotiations with the EU, the bank may need a beachhead in Europe to continue operations on the continent.
As to the employment report, the Labor Department has reported that the nation had added 209,000 positions in July; expectations had been for a gain of 180,000. At the same time, the unemployment rate came in at 4.3%; the consensus had been for a 4.3% rate. In June, the jobless rate had been 4.4%. This ties the low rate since the recession in 2007-2009. Also, job gains for May were reduced from 152,000 to 145,000; for June, though, they were revised up from 222,000 to 231,000. Importantly, and the best feature of this report was the fact that average hourly wages rose by nine cents, or above expectations in July.
This report, while better than forecast, still wasn’t strong enough, with a labor-force participation rate of 62.9%, to push the Federal Reserve to be more aggressive in raising interest rates. At most, we see just one additional interest rate increase this year, with that uptick unlikely to come before December. As for the stock market reaction, the U.S. equity futures, up modestly before the report was released, strengthened a little further in the moments following the issuance. Treasuries, though, weakened, with yields rising somewhat on the better-than-expected data.
Sir of Finance 