Economy
Strong Job Growth Dampens Hopes for Interest Rate Cut
By Investors Hub
The major U.S. index futures are currently pointing to a lower opening on Friday as trading is set to resume following the Independence Day holiday on Thursday.
Stock futures came under pressure following the release of a Labor Department showing a substantial reacceleration in the pace of U.S. job growth in the month of June.
The report said employment surged up by 224,000 jobs in June after edging up by a downwardly revised 72,000 jobs in May. Economists had expected employment to increase by about 160,000 jobs.
While the data points to a rebound in the labor market following the weakness seen in May, the report has dampened investor hopes for a near-term interest rate cut by the Federal Reserve.
Stocks showed a strong move to the upside over the course of a holiday-shortened trading session on Wednesday. With the upward move, the major averages added to the modest gains posted on Tuesday to reach new record closing highs.
The major averages ended the session at their best levels of the day. The Dow jumped 179.32 points or 0.7 percent to 8,170.23, the Nasdaq advanced 61.14 points or 0.8 percent to 8,170.23 and the S&P 500 climbed 22.81 points or 0.8 percent to 2,995.82.
The strength on Wall Street came as a batch of largely disappointing U.S. economic data reinforced expectations for a near-term interest rate cut by the Federal Reserve.
Initial buying interest was generated in reaction to a report from payroll processor ADP showing private sector job growth reaccelerated in the month of June but still came in below economist estimates.
ADP said private sector employment climbed by 102,000 jobs in June after rising by an upwardly revised 41,000 jobs in May.
Economists had expected employment to increase by about 140,000 jobs compared to the addition of 27,000 jobs originally reported for the previous month.
“Even with the US-China trade talks back on track (for now at least) the evidence of a slowdown in employment growth should still be enough to persuade the Fed to cut rates in either July or September,” said Paul Ashworth, Chief U.S. Economist at Capital Economics.
CME Group’s FedWatch tool shows an interest rate cut of at least 25 basis points at the Fed’s July meeting is priced into the markets, although Ashworth said expectations of a 50 basis point cut “seem misplaced.”
Stocks saw further upside after a report from the Institute for Supply showing a notable slowdown in the pace of service sector growth added to the optimism about a rate cut.
The ISM said its non-manufacturing index dropped to 55.1 in June from 56.9 in May, hitting its lowest level since a matching reading in July of 2017.
While a reading above 50 still indicates growth in service sector activity, economists had expected the index to show a more modest decrease to 55.9.
A separate report released by the Commerce Department showed the U.S. trade deficit widened by more than anticipated in the month of May, as the value of imports jumped by much more than the value of exports.
The Commerce Department said the trade deficit widened to $55.5 billion in May from a revised $51.2 billion in April. Economists had expected the trade deficit to widen to $54.0 billion.
The wider trade deficit came as the value of imports surged up by 3.3 percent to $266.2 billion compared to a 2.0 percent jump in the value of exports to $210.6 billion.
Andrew Hunter, Senior U.S. Economist at Capital Economics, said the wider than expected deficit suggests net trade was a “slightly bigger drag on second-quarter GDP growth than we had previously anticipated.”
“Despite the recent ceasefire agreed between Presidents Donald Trump and Xi Jinping, we still think it is slightly more likely than not that the trade dispute with China will ultimately escalate further,” Hunter said.
He added, “The upshot is that net trade is likely to remain a modest drag on growth over the second half of this year, which we expect to compound a sharp slowdown in domestic demand growth.”
Interest rate-sensitive commercial real estate stocks turned in some of the market’s best performances on the day, driving the Dow Jones U.S. Real Estate Index up by 1.3 percent.
Significant strength was also visible among housing stocks, which would also benefit from lower interest rates. The Philadelphia Housing Sector Index climbed 1.1 percent to its best closing level in over a year.
Transportation, software and telecom stocks also saw notable strength, moving higher along with most of the other major sectors.
By Dipo Olowookere
About 0.04 per cent was recovered on Friday from the loss recorded by the Nigerian Exchange (NGX) the previous due to profit-taking.
Yesterday, investors were in the market with renewed vigour, mopping up stocks trading at relatively cheaper prices.
According to data, the insurance counter gained 0.41 per cent, the banking sector appreciated by 0.38 per cent, and the consumer goods index grew by 0.14 per cent.
The gains achieved by these three sectors were enough to lift Customs Street at the close of business despite the 0.26 per cent decline printed by the industrial goods segment and the 0.14 per cent loss suffered by the energy industry. The commodity counter was flat during the session.
A total of 43 equities gained weight on the last trading day of this week, while 26 equities shed weight, indicating a positive market breadth index and strong investor sentiment.
Red Star Express increased its share price by 10.00 per cent to N13.20, NCR Nigeria grew by 9.97 per cent to N128.55, SCOA Nigeria inflated by 9.96 per cent to N14.90, Omatek appreciated by 9.94 per cent to N1.77, and Deap Capital expanded by 9.85 per cent to N4.46.
On the flip side, McNichols decreased by 8.81 per cent to N6.00, Legend Internet crumbled by 7.56 per cent to N5.50, Cornerstone Insurance crashed by 6.48 per cent to N6.35, C&I Leasing contracted by 6.29 per cent to N8.20, and Austin Laz slipped by 5.78 per cent to N3.75.
Yesterday, 539.9 million shares valued at N16.7 billion were transacted in 48,023 deals versus the 1.0 billion shares worth N31.6 billion executed in 51,227 deals in the preceding day, implying a shrink in the trading volume, value, and number of deals by 46.01 per cent, 47.15 per cent, and 6.26 per cent apiece.
Zenith Bank was the most active for the day with 54.6 million stocks sold for N3.8 billion, Jaiz Bank traded 41.5 million units worth N359.4 million, Secure Electronic Technology transacted 37.7 million units valued at N39.2 million, Access Holdings exchanged 30.5 million units for N699.2 million, and Lasaco Assurance transacted 27.2 million units worth N68.3 million.
When the market closed for the day, the All-Share Index (ASI) went up by 72.21 points to 166,129.50 points from 166,057.29 points and the market capitalisation gained N31 billion to N106.354 trillion from N106.323 trillion.
By Adedapo Adesanya
It was a positive ending for the Naira this week after it further appreciated against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, January 16 by N1.33 or 0.09 per cent to sell for N1,417.95/$1 compared with the previous day’s N1,419.28/$1.
The domestic currency also gained N2.41 against the Euro in the official market to close at N1,647.51/€1 versus the preceding session’s closing price of N1,649.92/€1, however, it suffered a N7.97 loss against the Pound Sterling in the same market window to trade at N1,901.32/£1, in contrast to Thursday’s closing price of N1,893.35/£1.
In the same vein, the Nigerian Naira depleted against the Dollar at the GTBank FX counter by N2 to quote at N1,427/$1 compared with the previous day’s N1,425/$1, but strengthened against the greenback at the black market yesterday by N5 to settle at N1,485/$1 versus the N1,490/$1 it was exchanged a day earlier.
Improved supply conditions helped keep the market within range as exporters’ and importers’ inflows in addition to non-bank corporate supply enhanced liquidity as the Central Bank of Nigeria (CBN) made no visible intervention.
Stronger external inflows from foreign portfolio investors (FPIs) and improving current account dynamics, continue to align with structural support in the wider economy.
Nigeria has seen projections of a stronger economic or gross domestic product (GDP) growth and lower inflation in 2026, with these forecasts citing improved macroeconomic fundamentals and reform impacts.
As for the cryptocurrency market, it was mixed following selloff in precious metals and lower US stocks appeared to be denting crypto sentiment.
Gold and silver, both of which also enjoyed big rallies earlier this week, tumbled 1.2 per cent and 5 per cent, respectively while key US stock indexes — the Nasdaq, S&P 500 and Dow Jones Industrial Average — all reversed from early gains to modest losses in Friday trade.
Dogecoin (DOGE) shrank by 2.2 per cent to $0.1370, Ripple (XRP) slipped by 0.8 per cent to $2.05, Ethereum (ETH) went down by 0.7 per cent to $3,228.56, and Bitcoin (BTC) slumped by 0.6 per cent to $95,086.80.
Conversely, Litecoin (LTC) appreciated by 3.2 per cent to $74.48, Solana (SOL) rose by 0.4 per cent to $143.70, Cardano (ADA) jumped by 0.2 per cent to $0.3942, and Binance Coin (BNB) increased by 0.1 per cent to $935.88, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 each.
By Adedapo Adesanya
Oil prices settled higher amid lingering worries about a possible US military strike against Iran, a decision that may still occur over the weekend.
Brent crude settled at $64.13 a barrel after going up by 37 cents or 0.58 per cent and the US West Texas Intermediate (WTI) crude finished at $59.44 a barrel after it gained 25 cents or 0.42 per cent.
The US Navy’s aircraft carrier USS Abraham Lincoln was expected to arrive in the Persian Gulf next week after operating in the South China Sea.
Market analysts noted that it doesn’t seem likely anything will happen soon. However, the weekends have become the perfect time for actions so as not offset the markets.
The market had risen after protests flared up in Iran and US President Donald Trump signalled the potential for military strikes, but lost over 4 per cent on Thursday as the American president said Iran’s crackdown on the protesters was easing, allaying concerns of possible military action that could disrupt oil supplies.
Iran produces approximately 3.2 million barrels per day, accounting for roughly 4 per cent of global crude production, so it was not a coincidence that markets rallied sharply through Tuesday and Wednesday as President Trump canceled meetings with Iranian officials and posted that “help is on its way” to Iranian protesters, raising fears of potential US military strikes that sent prices surging toward multi-month highs.
Weighing against those fears are potential supply increases from Venezuela.
The Trump administration is exploring plans to swap heavy Venezuelan crude for US medium sour barrels that can actually go straight into Strategic Petroleum Reserve (SPR) caverns, since not all all oil belongs in the reserve.
According to Reuters, the Department of Energy is considering moving Venezuelan heavy crude into commercial storage at the Louisiana Offshore Oil Port, while US producers deliver medium sour crude into the SPR in exchange.
Analysts expect higher supply this year, potentially creating a ceiling for the geopolitical risk premium on prices.
Some investors covered short positions ahead of the three-day Martin Luther King holiday weekend in the US.
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