RECAP: For the week ending August 5th, 2016

August 10, 2016

A strong rally Friday following the release of the July payrolls report left stocks higher for the week. The gains helped the Nasdaq Composite Index join the Dow Jones Industrial Average, Standard & Poor’s 500 Index, and S&P MidCap 400 Index in record territory. Earlier in the week, however, weak Chinese manufacturing data and the mixed results of European bank stress tests weighed on markets. Oil prices fell below $40 a barrel and into bear market territory—off more than 20% from recent highs—weighing on energy stocks and overall sentiment. A rebound in oil prices on Wednesday helped stocks recover some of their momentum, however. The biggest market mover by some measure was Friday morning’s jobs report. The Labor Department announced that employers had added 255,000 jobs in the month, well above expectations, while also revising previous months’ gains higher. In Europe, stocks ended the week slightly lower, despite a late-week lift following the announcement of a big stimulus package by the Bank of England (BoE) and strong jobs numbers coming out of the U.S… The pan-European benchmark Euro Stoxx 600 and Germany’s DAX were both dragged lower early in the week. Japan continues to attempt to fight off its stagnating economy: on Tuesday, Prime Minister Shinzo Abe gave the green light to an economic stimulus package totalin ¥28.1 trillion (approximately $275 billion) in a further effort to bolster the economy and stir inflation. The measures include substantial additional infrastructure spending and enhancements to welfare services. The government’s goal is for private sector demand to spur economic growth. According to the Kyodo News, Abe told a contingent of government and ruling party leaders, “[We want to] not only stimulate immediate demand, we aim to pursue sustainable economic growth…and ensure the creation of a society in which all people can play active roles.” The government believes that the latest stimulus package can increase Japan’s current GDP growth by approximately 1.3% over the next two years.
In other news, other central banks appear to be following in the footsteps of the BoE: China’s top economic planning agency called for a cut in interest rates and the reserve requirement ratio for banks in a rare public airing on monetary policy, and the Reserve Bank of Australia cut its overnight lending rate from 1.75% to 1.50%, a record low.

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