The dollar index declines amid weak labor market statistics

Last week investors’ attention was focused on NonFarm Payrolls data. The labor market statistics were disappointing. The US economy added only 235,000 jobs in August (vs. 733,000 expected). This is a very sharp slowdown in the labor market. The main reason is the increase in the number of Delta cases. However, the data from the previous two months were revised upward, and the unemployment rate decreased to 5.2% (previously 5.4%). On the one hand, such statistics would be negative for the dollar index and positive for the stock market. On the other hand, the market sentiment is now sharply shifting towards further growth of the major US indices. Considering the strongest divergence with the technical indicators, which indicates the strong overbought market, such market conditions will put pressure on the growth of quotes. In other words, the growth of main indices is limited. On Friday, the main American indices failed to strengthen. By the end of the week, the Dow Jones index decreased by 0.2%, while the S&P 500 increased by 0.6%, and the Nasdaq jumped by 1.6%. It’s a Bank Holiday in the United States and Canada today, so with no important events in the European session, the trading day will be quiet.

The leading US infectious disease expert, Dr. Anthony Fauci, said that officials were likely to get regulatory approval soon to introduce the COVID19 booster vaccines produced by Pfizer. Moderna is a bit behind in this regard. Last month, the Biden administration announced that it would begin offering boosters to Americans by September 20. A week ago, Israel began offering Pfizer’s 3rd vaccine to people older than 12. Officials said the effectiveness of the second dose of Pfizer declines five months after the vaccination, requiring revaccination. A third dose restores the level of protection.

European stock indices also decreased, following the US ones. On Friday, the British FTSE 100 decreased by 0.36%, Germany’s DAX 30 decreased by 0.37%, France’s CAC 40 lost 1.1%, Italy’s FTSE MIB decreased by 0.64%, and Spain’s IBEX 35 lost 1.3%. The spread of Delta negatively affects business activity in the Eurozone, slowing the pace of recovery. After last week’s poor inflation data, some ECB officials began calling for a reduction in the QE program. The ECB meeting on monetary policy will be held on Wednesday, so traders should not expect a strong increase in major indices until then.

At the close of the Tel Aviv Stock Exchange on Sunday, Israel’s main index TA 35 added 0.33%, reaching a new alltime high. The Israeli index often reflects investor behavior after Friday and before the opening of trading in the United States. So it is very likely the major US stock indices will continue to rise on Tuesday.

In October, the Saudi state oil company, Saudi Aramco, said that it would cut prices on all oil varieties for buyers from Asia and the Mediterranean countries. Oil prices began to decline at the opening of trading on Monday amid this news. This suggests that Saudi Arabia is assessing the situation on the worsening prospects for global demand because of the new wave of COVID19 in the world. On the other hand, the number of active oil rigs in the US decreased by 16 units (to 394) last week due to Hurricane Ida, which resulted in a slight decline in production.

Chinese Internet giant Alibaba will invest the equivalent of $15.5 billion over five years to the country’s “general prosperity.” The 100 billion Chinese yuan will be spread over 10 initiatives, including technological innovation, support of economic growth in China’s lessdeveloped regions, and support of workers and young entrepreneurs. The investment from Alibaba followed a similar $7.7 billion promise from Tencent. Both companies have previously been the focus of Chinese regulators. Many economists believe that this is a deal with the government to reduce the pressure.

Main market quotes:

S&P 500 (F) 4,535.43 −1.52 (−0.03%)

Dow Jones 35,369.09 −74.73 (−0.21%)

DAX 15,781.20 −59.39 (−0.37%)

FTSE 100 7,138.35 −25.55 (−0.36%)

USD Index 92.12 −0.11 (−0.12%)

by JustMarkets, 2021.09.06