2024-07-05 13:15

NEW YORK, July 5 (Reuters) - STORY: U.S. job growth slowed to a still-healthy pace in June, with the unemployment rate rising to 4.1%, increasing the chances that the Federal Reserve will be able to tame inflation without tipping the economy into recession. Nonfarm payrolls increased by 206,000 jobs last month, the Labor Department's Bureau of Labor Statistics said in its closely watched employment report on Friday. Data for May was revised sharply down to show 218,000 jobs added instead of the previously reported 272,000. MARKET REACTION: STOCKS: S&P 500 E-minis were mostly unchanged BONDS: The yield on benchmark U.S. 10-year notes was down 3 basis points to 4.317% FOREX: The dollar index fell 0.18% at 104.97 COMMENTS: SCOTT WREN SENIOR GLOBAL MARKET STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE, ST. LOUIS, MO "That was towards what the Fed wants to see. It was a favorable number that shows the economy is slowing down and wage growth was slowing a bit with unemployment ticking up. Wage growth was under 4%. The Fed wants to see it in the 3s." "It confirms a lot of the news we've seen lately that things are slowing down." KEITH LERNER, CO-CHIEF INVESTMENT OFFICER, TRUIST ADVISORY SERVICES, ATLANTA "Our overall thesis for the economy right now is one that's cooling but not weak. I think this report confirmed this but also I think it is the that 4% plus unemployment rate that will get the Fed's attention and probably provides them flexibility likely to start reducing rates. We think it's likely September." PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK "What we are looking at is a labor market that’s still producing jobs and the pickup in unemployment, which that might be considered on the negative side, and is probably due to weakness in the private sector.” "The key here is the fact that wages are cooling down and that makes this a respectable report as far as the markets are concerned.” "In terms of the Fed, we had last week a bunch of macro news which was not that great and indicated that the economy is accelerating to the downside a little bit faster than previously thought.” "So, this report puts the Fed in a comfortable spot and by that I mean if this continues next month, with no increases in hourly wages, then I think we’ll see a rate cut in September and another one in December.” BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN “Manufacturing just can’t catch a break. Employment was flat and narrow with only 45.8% of manufacturing industries reporting job gains. Within construction, a bright-spot in this report, it was mostly non-residential specialty trade contractors that saw the gains. A worrying trend is the 18% increase over the last year of the number of people working part-time because that’s all they could find. It’s not all sunshine and happiness despite the nice headline numbers.” ROBERT PAVLIK, SENIOR PORTFOLIO MANAGER, DAKOTA WEALTH, FAIRFIELD, CONNECTICUT. "It's a mixed jobs report. The numbers are all over the place. The top line looked better than expected. The prior month was revised much lower. Then if you look at private payrolls that came in lower than expected and was revised lower." "You get a mixed picture as to what's going on in the jobs market. Earnings were a little down and the average work week was unchanged." "The market is trying to digest this and it’s a very quiet market a day after a holiday and tomorrow is the weekend. I don't think that offices are very heavily staffed so you don't get much movement." "It’s somewhat of a positive for those that are looking for a rate cut. The numbers are indicating that economy is slowing which feeds into the ability to cut rates." "Overall it speaks to a rate cut coming this year and that's why you're starting to see futures tick up a little higher and treasury yields tick lower." EMILY BOWERSOCK HILL, CEO, BOWERSOCK CAPITAL PARTNERS, LAWRENCE, KANSAS "I would say it's a relatively benign report. The market was generally expecting the job gains to be a little bit lower, but the number was lower than May's report that really worried some people. If you're the Fed, you're saying - what happened in May is not quite as hot as we thought. The data isn't bad enough to alarm markets, and not bad enough to worry the Fed." "The data this week could open the door for two (rate cuts), and I expect another surprisingly good inflation report through the end of the summer as shelter costs come down. So I wouldn't be surprised with two cuts but our base case is still just one. The Fed has very clearly telegraphed they are expecting one cut." KIM FORREST, CHIEF INVESTMENT OFFICER, BOKEH CAPITAL PARTNERS, PITTSBURGH “Although (the data) came in hotter than expected, last month’s (data) was pretty aggressively reduced. Unemployment was higher than last month. These are all kind of indications that the economy is maybe not that hot right now. Combine this with last week's PCE number, and I think we're getting into a range that a lot of the members of the Fed can stand cutting, (with) the first rate cut sometime in September.” PAUL ASHWORTH, CHIEF NORTH AMERICA ECONOMST AT CAPITAL ECONOMICS IN TORONTO "Although the 206,000 gain in non-farm payrolls in June beat the consensus at 190,000, this was more broadly a disappointing report when we factor in the 111,000 downward revision to past months and the further rise in the unemployment rate to 4.1%, which puts us one step closer to triggering the Sahm rule on recessions.” "That 206,000 gain was not nearly as good as it looks at first glance. Government employment increased by 70,000, with big gains in non-education state and local government that are hard to square with the anecdotal evidence of budget shortfalls forcing many states to rein in spending. Of the 136,00 increase in private payrolls, health care and social assistance accounted for 82,000 of those additional jobs. That suggests cyclical employment increased by only about 50,000, adding to the evidence of weakness in GDP growth. The massive 48,900 decline in temporary help employment is also a disconcerting sign.” THOMAS HAYES, CHAIRMAN, GREAT HILL CAPITAL LLC, NEW YORK “The market was just bracing for if we were going to have a huge beat and that would have been terrible, because it would have pushed (interest rate cut expectations from) the Fed out to maybe 2025. “The fact that we came broadly in-line (on the payrolls number) and that the unemployment rate ticked up, signals to the market that if the Fed wants to cut (in September), they have enough cover to cut.” “The other thing that we found for the last 12 months is that, even though you've had a lot of big beats, when you get a month or two months out, you find that they are dramatically revised down.” Sign up here. https://www.reuters.com/markets/us/view-june-us-job-growth-moderates-unemployment-rate-ticks-up-2024-07-05/

2024-07-05 13:02

Investors keen on UK's Labour but want policy detail Labour's first budget will be major credibility test Economic outlook clouded by high debt, rising taxes LONDON, July 5 (Reuters) - Big investors are warming to Britain after a landslide election win for its new Labour government but remain wary of placing long term bets until Prime Minister Keir Starmer can convince them his economic growth plans are credible. Sterling , the strongest major currency against the dollar this year, nudged higher on Friday when the scale of Labour's victory became clear. The UK-focused FTSE 250 share index (.FTMC) New Tab, opens new tab, which has outpaced the more global FTSE 100 year-to-date, rose to its highest since April 2022. But investors said Labour still needed to revive long-term confidence in UK markets that have struggled since 2016's Brexit vote and the chaos wreaked by Conservative former Prime Minister Liz Truss' 2022 mini-Budget. Left-leaning Labour has pledged to upgrade Britain's creaking infrastructure and solve a housing shortage while keeping spending tight as the UK's tax burden approaches an all-time high. But credit rating agencies and Britain's lenders in international bond markets are twitchy about public debt that is expected to exceed 100% of gross domestic product. "They have to walk a tightrope between economic growth and government debt. We have to see if debt issuance is going to rise, and if the economy can expand at a rate where extra borrowing is deemed acceptable," said Sheldon MacDonald, chief investment officer at UK asset manager Marlborough. MacDonald said he had a neutral outlook on UK stocks but was slightly positive on gilts because of expected Bank of England rate cuts. After years of relentless outflows, the combined market value of companies in the broad FTSE-All stock index(.FTAS) New Tab, opens new tab , at 2.4 trillion pounds ($3.07 trillion), is below that of individual U.S. tech stocks like Apple (AAPL.O) New Tab, opens new tab and chipmaker Nvidia (.NVDA.O) New Tab, opens new tab. STABILITY, THEN WHAT? After Rishi Sunak conceded defeat to Labour early on Friday and resigned as party leader, the Conservatives were set to choose their sixth leader since 2016 following years of infighting over Britain's post-Brexit future. Investors hope Starmer and his incoming finance minister, former Bank of England economist Rachel Reeves, will provide more stable leadership as well as predictable tax and trade policies. "Investors in New York or Hong Kong would have read the headlines and found it easy to say why bother, it's a basket case," said Toby Gibb, head of investment solutions at fund manager Artemis. "What (the election) does is relieve that uncertainty, it allows overseas investors to invest with more security." In one positive sign, sterling on a trade-weighted basis is back at levels last seen before the Brexit vote. Gibb said he expected the pound to stay strong and was bullish on UK stocks. Other investors were staying cautious. "We know that a general incremental improvement can come from political stability but we don't know what changes are going to happen," said Janus Henderson European equities portfolio manager Tom O'Hara, whose UK exposure is below Britain's share of MSCI's broad European index (.dMIEU00000PUS) New Tab, opens new tab. "You need something more tangible," he explained, "such as which companies are going to benefit from which policies." Britain has not grown faster than 2% a year on a regular basis since before the 2008 global financial crisis. Ben Mackie, fund manager at UK-based Hawksmoor Investment Management, said he was also not buying into a UK growth theme. "The UK stock market and economy face big structural issues," he said, adding that outflows from UK equity funds had been "horrendously negative." UK business investment is ranked 28th among 31 OECD economies, foreign direct investment has faltered and workplace productivity is weak. British pension funds and insurers have slashed the share of UK stocks in their portfolios to about 4% from 50% in 2000 according to New Tab, opens new tab advisory group Ondra. In June, even as polls moved to predict Labour's historic victory, investors pulled $5.9 billion out of UK equity funds, marking the 44th consecutive month of outflows, LSEG data showed. But in one positive sign, big U.S. and Asian investors were asking questions about the UK for the first time in years, said UBS head of European equity strategy Gerry Fowler. "Interest has become more widespread," he said. "But that enthusiasm isn't likely to be translating into really strong performance in the near term. I don't think much money has moved in yet." ($1 = 0.7823 pounds) Sign up here. https://www.reuters.com/world/uk/investors-put-uk-election-winner-labour-credibility-watch-2024-07-05/

2024-07-05 12:59

LONDON, July 5 (Reuters) - Leading European cognac producers will attend a hearing on China's anti-dumping probe of the industry in Beijing on July 18 - their first chance to defend themselves in person since the investigation began earlier this year, an industry source said. Companies behind major brands Martell, which is owned by Pernod Ricard (PERP.PA) New Tab, opens new tab, Remy Martin - part of Remy Cointreau (RCOP.PA) New Tab, opens new tab - and Hennessy, owned by LVMH (LVMH.PA) New Tab, opens new tab, received a summons overnight to attend the hearing, the source said. "We will go ... and they will tell us what questions they want us to answer," the source said, asking not to be named as they were not authorised to speak on behalf of the industry. "There may be some leeway to say what we want, which is that we are happy to cooperate but we don't think there is any dumping and there is no good reason for them to apply duties." China announced plans on Friday for the hearing on European brandy imports, ramping up tension on the same day the European Commission's provisional tariffs on Chinese-made electric vehicles take effect. Beijing announced its anti-dumping probe on EU brandy in January, saying European brandy producers were selling into China at below-market rates. France's cognac makers said they suspected the probe was linked to a broader trade row rather than the liquor market. French cognac accounts for most of China's brandy imports. The companies producing Martell, Remy Martin and Hennessy cognac were selected as sample firms for the investigation. CAUTIOUS OPTIMISM Cognac makers did not call the meeting, the source said. The industry had however previously signalled its willingness to participate in a hearing, which will mark its first opportunity to make a case against tariffs in person, the person said. The industry "asked to be heard" and will attend the meeting, a spokesperson for industry association the Bureau National Interprofessionnel du Cognac said via email, adding the industry will continue to cooperate. Ultimately, however, its fate will be decided in political negotiations, the industry source said, adding the cognac sector is "cautiously optimistic" now that officials from Beijing and Brussels are meeting to talk face to face. Some media have reported that provisional tariffs on EU brandy could be announced as soon as August. However, the industry had not been given any information on time lines, the source said. Chinese statute says that the investigation should conclude within a year, but that this can be extended by up to six months, the source continued. The probe could therefore run until July 2025. After July's hearing, investigators may seek more information on how cognac companies price or make their products, or request to visit their sites, the source added. Sign up here. https://www.reuters.com/business/retail-consumer/europes-top-cognac-makers-will-attend-china-meeting-anti-dumping-probe-source-2024-07-05/

2024-07-05 12:54

Beryl leaves Mexico's Yucatan mostly unscathed At least 11 dead in Caribbean islands, Venezuela Beryl expected to pick up intensity in Gulf of Mexico Parts of Grenada suffered 'almost complete devastation' CANCUN/TULUM, Mexico, July 5 (Reuters) - Tropical Storm Beryl was blowing out to the Gulf of Mexico on Friday afternoon and appeared likely to reach Texas by late Sunday, after its strong winds and heavy rain largely spared Mexico's top beach destinations. The core of the storm, downgraded from a hurricane, crossed the Yucatan Peninsula by Friday afternoon, with its maximum wind speeds slowing to around 65 miles mph (105 kph) after striking near the coastal beach resort of Tulum in the morning. The storm, which at one point intensified to a massive Category 5 hurricane, left a deadly trail of destruction across the Caribbean earlier this week. However, there were no casualties in Mexico, the head of the country's civil protection agency Laura Velazquez said in a press conference on Friday afternoon. While Beryl's passage over Mexico's Quintana Roo and Yucatan states resulted in slower winds, the U.S. National Hurricane Center still forecast dangerous storm surges in the surrounding area. For those who hunkered down as Beryl churned overhead, a sense of relief prevailed. "Holy cow! It was an experience!" said Mexican tourist Juan Ochoa, who was staying in Tulum. "Really only some plants flew up in the air," he said. "Thank God we're all OK." Tourist infrastructure was without major damage in Quintana Roo, the state government said in a statement. Still, many in the area lost electricity, including 40% of Tulum, said Guillermo Nevarez, an official with Mexico's national electricity company CFE, speaking to local broadcaster Milenio. Civil protection chief Velazquez said she expected service to be restored in full by Sunday. Among Mexico's top tourist getaways, the Yucatan Peninsula is known for its white sand beaches, lush landscapes and Mayan ruins. Stranded tourists camped out in Cancun's international airport on Friday, unsure of when they would make it home. Nora Vento said her flight home to Chile was postponed multiple times, and that her airline's counter was unstaffed. "So, I don't know when I will get to Chile," she said. Beryl, currently located over the port of Progreso in Mexico's Yucatan state, was expected to pick up intensity as it enters the Gulf of Mexico and forecast to regain hurricane status and approach the western Gulf coast on Sunday. A hurricane watch was in effect for the Texas coast from the mouth of the Rio Grande northward to Sargent, according to the U.S. National Hurricane Center (NHC). Mexico's meteorological service issued a hurricane watch for the northeastern coast of Mexico from Barra el Mezquital to the mouth of the Rio Grande. "There is an increasing risk of damaging hurricane-force winds and life-threatening storm surge in portions of northeastern Mexico and the lower and middle Texas Coast late Sunday and Monday where hurricane and storm surge watches have been issued," the NHC said. It warned that flash and urban flooding were possible across portions of the Texas Gulf Coast and eastern Texas from Sunday through the middle of next week. Rainfall of 5 to 10 inches, with localized amounts of 15 inches, is projected across portions of the Texas Gulf Coast and eastern Texas beginning late on Sunday through the middle of next week. Mexico's national water commission, CONAGUA, flagged a risk of flooding around the tourist hubs, as well as in neighboring Campeche state. Quintana Roo schools were closed, as were local beaches, and officials lifted a temporary ban on alcohol sales. Beryl was the first hurricane of the 2024 Atlantic season, and this week became the earliest Category 5 hurricane on record, with scientists pointing to its rapid strengthening as almost certainly fueled by human-caused climate change. Before reaching Mexico, Beryl wreaked havoc across several Caribbean islands. It swept through Jamaica, Grenada, St. Vincent and the Grenadines, in addition to unleashing heavy rainfall on northern Venezuela. It has claimed at least 11 lives, tearing apart buildings while felling power lines and trees. Destruction in the islands of Grenada was especially pronounced. Prime Minister Dickon Mitchell pointed to major damage to homes in Grenada, Carriacou and Petite Martinique during a video briefing Thursday night. Parts of the latter two islands suffered "almost complete devastation," he said. "Many of our citizens have lost everything." Mexico's major oil platforms, primarily located in the southern rim of the Gulf of Mexico, are not expected to be affected or shut down. Beryl is also expected to have little impact on U.S. offshore oil and gas production, energy companies said on Friday while evacuating personnel from some facilities out of caution. Research by the ClimaMeter consortium determined that climate change significantly intensified Beryl. According to the study, the storm's severity, along with its associated rainfall and wind speed, saw an increase of 10-30% as a direct result of climate change. Sign up here. https://www.reuters.com/world/americas/hurricane-beryl-makes-landfall-mexican-coast-2024-07-05/

2024-07-05 12:20

BERLIN/FRANKFURT, July 5 (Reuters) - Germany said on Friday it will launch the first tender for the construction and modernisation of 12.5 gigawatts (GW) of gas power plants that can switch to hydrogen by the end of 2024 or early next year, following industry pressure. The tenders are part of efforts to supplement wind and solar energy and speed up the transition to low carbon generation as Germany shifts to renewables, having switched off nuclear power. Germany's top utilities, notably RWE (RWEG.DE) New Tab, opens new tab, EnBW (EBKG.DE) New Tab, opens new tab and Uniper (UN0k.DE) New Tab, opens new tab, have long criticised the lack of details for the scheme, warning that this could put at risk Germany's plan to accelerate the phase-out of coal. The plans include two tenders for building new hydrogen-ready gas power plants, each round of 5 GW capacity, in addition to 2 GW tenders for retrofitting old gas power plants for the use of hydrogen, 0.5 GW of long-term storage and 0.5 GW for fully-hydrogen-powered plants, the economy ministry added. Investment costs and the difference in operating costs between hydrogen and natural gas will be subsidised for 800 full-load hours per year once the switch to hydrogen is made, the ministry said in a statement. Uniper CEO Michael Lewis said the company was prepared to play its part in upcoming talks and that it would participate in the scheme, provided conditions are favourable. RWE, Germany's largest power producer, said it was good that the first tenders would start soon, adding it was now waiting for specifics, which it would then analyse. "It is important that the details of the auction design are made known to potential bidders in good time, as participation in an auction requires a certain amount of preparation and there is time pressure," EnBW CEO Georg Stamatelopoulos said. The tenders will be divided into two phases, with a deadline of eight years for the first-phase-constructed plants to switch to green or blue hydrogen, the ministry said. The plants will be predominantly be built in southern Germany, where much of the country's industrial complex is located, to enhance grid stability and cut costs. Germany last month won the European Union's informal approval to pay billions of euros to subsidise the power plants. Sign up here. https://www.reuters.com/business/energy/germany-seek-bids-125-gw-h2-ready-power-plants-2024-07-05/

2024-07-05 11:48

Fed rate cut debate in view as U.S. job market cools S&P 500 tech sector hits record high Banks down ahead of Q2 results next week Macy's up on report Arkhouse, Brigade Capital raise buyout offer Indexes up, Dow 0.17, S&P 0.54, Nasdaq 0.9% NEW YORK, July 5 (Reuters) - Wall Street stock indexes closed firmer on Friday, with the tech-heavy Nasdaq and benchmark S&P 500 hitting record highs, as new data showing U.S. labor market weakness boosted expectations for interest rate cuts as early as September. The rally was fueled by megacap stocks such as Microsoft (MSFT.O) New Tab, opens new tab which rose nearly 1.5% to end at a record high. Meta Platforms also scored an all-time closing high, gaining around 5.9% to push the information technology (.SPLRCT) New Tab, opens new tab sector to a record high. S&P 500 communication services (.SPLRCL) New Tab, opens new tab was the top performing sector, reaching its highest level since 2000. The Dow Jones Industrial Average (.DJI) New Tab, opens new tab rose 67.87 points, or 0.17%, to close at 39,375.87. The S&P 500 (.SPX) New Tab, opens new tab gained 30.17 points, or 0.54%, at 5,567.19 and the Nasdaq Composite (.IXIC) New Tab, opens new tab advanced 164.46 points, or 0.90%, to 18,352.76. For the week, the S&P 500 gained 1.95%, the Nasdaq rose 3.5% pct, and the Dow climbed 0.66%. Labor Department data showed U.S. jobs growth slowed marginally in June, and the unemployment rate rose to an over 2-1/2-year high, while wage gains slowed. Investors expect the data could stir more active debate on rate cuts when the Federal Reserve meets later this month. Odds of the U.S. central bank easing in September jumped to 79% from 66% seen before the data, CME's FedWatch Tool showed. "This report puts the Fed in a comfortable spot," said Peter Cardillo, chief market economist at Spartan Capital Securities. "If this continues next month, with no increases in hourly wages, then I think we'll see a rate cut in September and another one in December." Data released earlier this week also pointed to the U.S. economy losing steam, helping the S&P 500 and Nasdaq notch record closing highs during Wednesday's holiday-shortened session. "We're in this kind of stagflation adjacent environment - growth is moderating, inflation is staying where it is for the time being," said Alex McGrath, chief investment officer for NorthEnd Private Wealth. He said the environment is not great for small caps, which are sensitive to interest rates, but megacap companies are pumping out strong earnings which keep the market strong. The Russell 2000 Small Cap index is down 0.95% for the week. Major banks fell ahead of second-quarter corporate earnings reports starting next Friday. Higher interest rates and an uncertain economic environment are casting a cloud over U.S. bank earnings. Bank of America (BAC.N) New Tab, opens new tab, Wells Fargo (WFC.N) New Tab, opens new tab and JPMorgan & Chase (JPM.N) New Tab, opens new tab dropped between 1.2% to 1.7%, pushing the S&P 500 banks index (.SPXBK) New Tab, opens new tab 1.6% lower. Macy's (M.N) New Tab, opens new tab on Friday surged 9.5% after a report said Arkhouse Management and Brigade Capital raised their bid to buy the department store chain for about $6.9 billion. Advancing issues outnumbered decliners by a 1.04-to-1 ratio on the NYSE. On the Nasdaq, declining issues outnumbered advancers by a 1.05-to-1 ratio. The S&P 500 posted 19 new 52-week highs and eight new lows while the Nasdaq Composite recorded 46 new highs and 162 new lows. Volume on U.S. exchanges was 9.73 billion shares, compared with the 11.57 billion average for the full session over the last 20 trading days. Sign up here. https://www.reuters.com/markets/us/futures-edge-higher-ahead-key-payrolls-data-2024-07-05/