Economy
Trade Talks Uncertainty Weigh on Wall Street
Investors Hub
The major U.S. index futures are currently pointing to a lower opening on Monday, with stocks likely to give back ground following the rally seen last Friday.
Lingering concerns about the ongoing U.S.-China trade war may weigh on the markets ahead of the next round of high-level trade talks in Washington later this week.
Ahead of the talks, scheduled to begin on Thursday, a report from Bloomberg News said Chinese officials are signaling they?re increasingly reluctant to agree to the broad trade deal being pursued by President Donald Trump.
Citing people familiar with the discussions, Bloomberg said senior Chinese officials have indicated the range of topics they?re willing to discuss has narrowed considerably.
An offer from Chinese Vice Premier Liu He would purportedly not include reforming Chinese industrial policy or government subsidies.
The upcoming negotiations come as the trade war continues to hang over the economy, with a survey by the National Association for Business Economics showing 53 percent of economists see trade policy as the key downside risk to the economy.
The NABE said four out of five panelists believe that risks to the economic outlook are weighted to the downside, an increase from the 60 percent who held this view in June.
?The panel turned decidedly more pessimistic about the outlook over the summer, with 80% of participants viewing risks to the outlook as tilted to the downside,? said Survey Chair Gregory Daco, chief U.S. economist at Oxford Economics.
He added, ?The rise in protectionism, pervasive trade policy uncertainty, and slower global growth are considered key downside risks to U.S. economic activity.?
Following the significant rebound seen over the course of the trading day last Thursday, stocks showed another substantial move to the upside during trading last Friday. With the rally, the major averages further offset the steep losses posted last Tuesday and Wednesday.
The major averages finished the session just off their best levels of the day. The Dow soared 372.68 points or 1.4 percent to 26,573.72, the Nasdaq surged up 110.21 points or 1.4 percent to 7,982.47 and the S&P 500 spiked 41.38 points or 1.4 percent to 2,952.01.
For the week, the major averages turned in a mixed performance. While the Nasdaq rose by 0.5 percent, the S&P 500 fell by 0.3 percent and the Dow slid by 0.9 percent.
The rally on Wall Street came following the release of a closely watched Labor Department report showing weaker than expected job growth but an unexpected drop in the unemployment rate to a nearly 50-year low.
The mixed data seemed to serve the dual purpose of reinforcing expectations the Federal Reserve will continue cutting interest rates while at the same offsetting concerns about a potential recession.
The report said non-farm payroll employment rose by 136,000 jobs in September compared to economist estimates for an increase of about 145,000 jobs.
Meanwhile, the increases in employment in July and August were upwardly revised to 166,000 jobs and 168,000 jobs, respectively, reflecting the addition of 45,000 more jobs than previously reported.
The average monthly job growth has still slowed from 223,000 jobs per month in 2018 to 161,000 jobs per month so far in 2019.
The Labor Department also said the unemployment rate fell to 3.5 percent in September from 3.7 percent in August. Economists had expected to unemployment rate to remain unchanged.
With the unexpected decrease, the unemployment rate dropped to its lowest level since hitting a matching rate in December of 1969.
The unexpected drop in the unemployment rate came as a 391,000-person jump in the household survey measure of employment more than offset an 117,000-person increase in the size of the labor force.
Even with the unemployment rate hitting a nearly 50-year low, the report said average hourly employee earnings edged down by a penny to $28.09 in September after rising by 11 cents in August.
Compared to the same month a year ago, average hourly earnings were up by 2.9 percent in September, reflecting a notable slowdown from the 3.2 percent increase in August.
Citing headwinds from weaker global growth, trade uncertainty and the strong U.S. dollar, ING Chief International Economist James Knightley expects job growth to average closer to 120,000 for the rest of the year.
“This suggests pay growth is unlikely to accelerate markedly from here and with inflation picking up, the real wage growth story may not be as positive for spending power,” Knightley said. “All in all, it looks as though the Fed will need to step in with more policy easing to support the economy.”
Stocks saw further upside in afternoon trading after Fed Chairman Jerome Powell described the U.S. economy as “in a good place,” and said it is the central bank’s job to “keep it there as long as possible.”
Gold stocks moved sharply higher over the course of the trading session, driving the NYSE Arca Gold Bugs Index up by 2.1 percent. The rally by gold stocks came despite a modest decrease by the price of the precious metal.
Significant strength also emerged among semiconductor stocks, with the Philadelphia Semiconductor Index surging up by 1.9 percent.
Financial, housing, software, and healthcare stocks also saw considerable strength amid broad based buying interest on Wall Street.
By Dipo Olowookere
A 0.38 per cent loss was suffered by Nigerian stocks on Tuesday on the back of continued selling pressure from investors embarking on profit-taking.
Data from the Nigerian Exchange (NGX) Limited showed that the contraction was influenced by the 1.78 per cent decline recorded by the insurance sector, the 0.24 per cent slip printed by the consumer goods index, and the 0.09 per cent drop posted by the energy space, offsetting the 0.75 per cent growth achieved by the banking sector and the 0.21 per cent growth recorded by the industrial goods segment.
Investor sentiment was weak during the trading day, as the bourse ended with 13 price gainers and 40 price losers, representing a negative market breadth index.
LivingTrust Mortgage depreciated by 10.00 per cent to N3.42, Multiverse also shed 10.00 per cent to N22.95, McNichols dropped 9.92 per cent to N5.45, Thomas Wyatt dipped by 9.87 per cent to N3.56, and Eterna lost 8.57 per cent to trade at N33.00.
On the flip side, AVA Capital improved by 9.94 per cent to N9.95, Livestock Feeds expanded by 9.71 per cent to N8.65, Neimeth increased by 8.43 per cent to N9.00, AIICO gained 3.47 per cent to settle at N4.18, and Oando grew by 3.30 per cent to N36.00.
A total of 1.6 billion equities valued at N28.7 billion exchanged hands in 54,160 deals yesterday versus the 923.0 million equities worth N37.9 billion traded in 72,544 deals on Monday, indicating a 73.35 per cent surge in the trading volume, a 24.27 per cent decline in the trading value, and a 25.34 per cent slip in the number of deals.
The busiest stock was Japaul, which transacted 904.4 million units for N2.7 billion. Sterling Holdings sold 54.0 million units valued at N431.9 million, FCMB exchanged 49.5 million units worth N545.9 million, Chams traded 44.9 million units for N199.2 million, and Neimeth sold 42.4 million units worth N327.8 million.
Business Post reports that the All-Share Index (ASI) gave up 927.70 points to 244,802.83 points from 245,730.53 points, and the market capitalisation receded by N599 billion to N158.016 trillion from N158.615 trillion.
By Adedapo Adesanya
The Naira put up a better performance against the United States Dollar in the various segments of the foreign exchange (FX) market on Tuesday, August 4.
In the parallel market, it improved its value by N5 to settle at N1,400/$1 compared with the previous day’s value of N1,405/$1, and at the GTBank forex desk, it appreciated by N1 to close at N1,373/$1, in contrast to the preceding session’s N1,374/$1.
In the Nigerian Autonomous Foreign Exchange Market (NAFEX) segment, the Nigerian currency gained N2.28 or 0.17 per cent against the greenback to quote at N1,362.55/$1 compared with the N1,364.83/$1 it was exchanged a day earlier.
Also in the official market, the local currency appreciated against the Pound Sterling during the session by N6.48 to finish at N1,831.41/£1 versus N1,837.89/£1, and chalked up N5.22 on the Euro to sell at N1,568.71/€1 versus N1,573.93/€1.
Interbank FX transactions increased 14 per cent day-on-day as market makers’ activities raised total Dollar volume exchanged to $156.23 million, more than 132 per cent above $137.05 million in turnover at the previous close.
The interbank FX turnover rose despite a marginal rise in deals at the NFEM window as data from the central bank put Tuesday’s quote at 139 from 138.
As for the cryptocurrency market, major tokens were mixed as global stock indexes hit fresh records on renewed enthusiasm for artificial-intelligence-related shares.
With cheaper oil, easing rate expectations and a strong risk-on rally in equities supporting digital assets, analysts say crypto appears to be driven by internal market dynamics rather than macroeconomic factors, even as traders watch for a potential Strait of Hormuz deal.
It was reported overnight that Iran and Oman were close to an agreement to reopen the Strait of Hormuz, with an announcement targeted for Wednesday.
Binance Coin (BNB) grew by 1.8 per cent to $600.54, Bitcoin (BTC) rose by 0.9 per cent to $64,199.86, Solana (SOL) jumped by 0.8 per cent to $73.95, and Ethereum (ETH) advanced by 0.7 per cent to $1,867.21.
But Cardano (ADA) depreciated by 1.9 per cent to $0.1908, TRON (TRX) dipped by 0.6 per cent to $0.3268, Dogecoin (DOGE) slumped by 0.5 per cent to $0.0698, and Ripple (XRP) crashed by 0.4 per cent to $1.06, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 apiece.
By Adedapo Adesanya
Brent crude dropped below $80 per barrel, precisely losing $4.41 or 5.3 per cent to settle at $79.36 a barrel on Tuesday, after comments by officials from the United States and Qatar raised hopes for a diplomatic resolution to the Iran war, which could improve oil flows through the Strait of Hormuz.
Also, the US West Texas Intermediate (WTI) futures depreciated by $4.57 or 5.7 per cent to trade at $75.77 a barrel.
US Secretary of State Marco Rubio said on Tuesday there was progress in talks with Iran and Oman about moving more ships through the strait, but a final agreement was yet to be reached.
Also, Treasury Secretary Scott Bessent had said earlier on Tuesday that a deal with Iran to reopen the strait could come as soon as Tuesday or Wednesday.
Qatar’s Foreign Ministry spokesperson Majed al-Ansari said efforts to secure a diplomatic resolution to the war were continuing.
Qatar said it has discussed with US President Donald Trump ways to reduce escalation and converge viewpoints between the US and Iran.
Meanwhile, the latest round of US-facilitated talks between Israel and Lebanon began on Tuesday and will continue through Thursday.
Amid this, Iran still wants control over inbound shipping and visibility over outbound traffic through the Strait of Hormuz, with the ability to intervene if necessary, as part of a plan being discussed with Oman to reopen the strategic waterway.
Market analysts noted that the prospect of a diplomatic solution to the conflict has helped remove some of the geopolitical risk premium in oil prices. If negotiations between the US and Iran make meaningful progress, the market could continue pricing in a lower probability of supply disruptions.
Disruptions to shipping through the strait, through which a fifth of global oil and gas flowed before the war, have forced Middle Eastern nations to cut oil output sharply. The world has lost more than 2.6 billion barrels of oil since the Iran war began in February.
Shipping traffic at the key Gulf waterways of Bab el-Mandeb and the Strait of Hormuz remained unchanged at the start of the week.
The American Petroleum Institute (API) estimated that crude oil inventories in the US rose by 2.69 million barrels in the week ending July 30. Commercial crude oil inventories excluding the SPR have lost just over 58 million barrels over the last sixteen weeks, with US crude inventories down just 7.2 million for the year, according to API data.
Official data from the US Energy Information Administration (EIA) will be released later on Wednesday.
