Week in Review
The global stock markets extended their losses for the fourth consecutive day last Friday exemplified by the S&P500 registering its largest weekly decline since April. Festering concerns about the recent debt default by Argentina exerted pressure on investor sentiment by countering any positive impacts resulting from an encouraging US labor report. The US dollar reversed the gains that it captured against a basketful of other major currency pairs the day before after Friday’s unemployment figures provided the US Federal Reserve will sufficient leeway to retain its dovish stance for an extended period of time. However, geopolitical concerns dominated proceedings towards the end of last week prompting the stock markets to slump last Friday epitomized by the Dow Jones Industrial Average plunging by almost 70 points; the S&P500 inching lower by 5 points and the NASDAQ sliding downwards by 17 points.
The US Department of Labor posted its highly anticipated labor report last Friday disclosing that US employers had created 209,000 during July, which missed analysts’ expectations of 233,000. A more worrisome aspect was that the unemployment rate had unexpectedly increased last month to 6.2% from the previous 6.1%. However, prominent economists were quick to advise that although these figures were somewhat of a disappointment, they still clearly demonstrated that the US labor market was gaining traction.
They also emphasized the importance of minimum wage inflation resulting from a flat growth profile of average hourly earnings. They explained that the US Federal Reserve will have more headroom to maintain its benchmark interest rate at historic lows if wage inflation is stagnant or declining. The Fed monitors this particular economic indicator extremely carefully when devising its future guidance policy. For example, any slack in the national economy could prompt the US Central Bank to instigate an interest hike sooner-than-expected.
Nevertheless, despite the publication of key US economic data, investor attention was diverted towards geopolitical concerns, especi