The Friday Market Minute
- Global stocks slide as President Trump's issues two Executive Orders banning "U.S. transactions" with China-based social media apps.
- The ban affects WeChat and TikTok and will come into effect next month, stoking further tensions between Washington and Beijing.
- The Commerce Department's July employment report shows 1.8 million new jobs were added to the economy last month, a sharp decline from the 4.8 million pace recorded in June.
- Lawmakers in Washington remain deadlocked in talks aimed at establishing another round of coronavirus stimulus, with Trump threatening an Executive Order to extend billions in unemployment benefits.
- Gold prices retreat from all-time highs as the dollar rebounds from two-year lows on foreign exchange markets, while benchmark 10-year note yields hold sat 0.52%
- U.S. equity futures suggest a weaker open on Wall Street after the July employment report.
U.S. equity futures traded lower Friday, while bond yields retreated and gold peeled away from recent record highs, as markets reacted to another tremor in political tensions between Washington and Beijing.
Stocks pared declines, however, after data from the Bureau of Labor Statistics said the U.S. economy added a better-than-expected 1.8 million jobs last month pulling the headline unemployment rate to 10.2%, but the pace of hiring slowed from the previous month amid a surge in coronavirus infections and new business closures.
The BLS said payrolls increased by 1.763 million, well ahead of the Street consensus forecast of 1.58 million but sharply slower than the 4.791 million confirmed for the month of June. The gains clipped the headline unemployment rate to 10.2%, down from 11.1% in June. Average hourly earnings, the BLS said, rose 0.2% from last month to $29.32.
Futures contracts tied to the Dow Jones Industrial Average suggest an 80 point opening bell decline, while those linked to the S&P 500 are indicating a 9 point pullback for the broader benchmark.
President Donald Trump issued Executive Orders late Thursday that bar "U.S. transactions" with China-based social media apps WeChat and TikTok, citing "significant risks" to personal data and digital security.
"TikTok ... automatically captures vast swaths of information from its users," the Order read. "This data collection threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information — potentially allowing China to track the locations of Federal employees and contractors, build dossiers of personal information for blackmail, and conduct corporate espionage."
"Like TikTok, WeChat automatically captures vast swaths of information from its users," a second Order said. "This data collection threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information. In addition, the application captures the personal and proprietary information of Chinese nationals visiting the United States, thereby allowing the Chinese Communist Party a mechanism for keeping tabs on Chinese citizens who may be enjoying the benefits of a free society for the first time in their lives."
The decision, which will be challenged by owners Tencent Holdings and ByteDance, will come into effect in mid-September, around the same time Microsoft MSFT is expected to either complete its purchase of TikTok or walk away from a transaction that was essentially forced by the White House.
It also does little to ease the simmering tensions between Washington and Beijing, which were further stoked by data earlier this morning showing a $32.5 billion trade surplus between China and the U.S. last month, up from $29.4 billion in June.
Investors were also looking for more clarity from U.S. lawmakers as to their progress on talks aimed at establishing a fresh round of stimulus to replace unemployment benefits which lapsed last week.
Negotiations are expected to continue today in Washington -- and President Trump has threatened to use Executive Orders to extend the weekly $600 payment -- although the Republicans and Democrats remain trillions of dollars apart in their respective plans.
With a key reading of the U.S. jobs market due at 8:30 am Eastern time, and analysts worried that weak hiring data this week puts pressure on their collective forecast of 1.58 million in new positions added last month, markets were in a defensive mood heading into the start of the session.
U.S. 10-year Treasury bond yields, which have been moving in tandem with equity futures for the past few weeks, were marked at 0.533% in European trading, while the U.S. dollar index bounced from a two-year low against a basket of six global currencies to trade at 93.186 during early New York hours.
European stocks were modestly firmer heading into the July employment report, with the Stoxx 600 rising 0.06% and Britain's FTSE 100 nudging 0.03% by mid-day in London.
Overnight in Asia, stronger-than-expected China trade data, which indicated a 7.2% rebound in global exports and an overall trade surplus of $62.3 billion, provided early support for markets that was ultimately snuffed out by Trump's Executive Order on WeChat and TikTok.
The region-wide MSCI ex-Japan benchmark fell 0.84% lower heading into the final hours of the week while Japan's Nikkei 225 ended 0.39% lower at 22,329.94 points.
Gold prices retreated from yesterday's all-time peak of $2,075 per ounce as the dollar rebounded, and were last seen trading at $2,060 per ounce, while oil slipped lower even as the China trade data showed a 25% jump in crude imports when compared to last year's figures.
WTI contracts for September delivery, the U.S. benchmark, 58 cents lower from their Thursday close in New York and were changing hands at $41.37 per barrel in early European dealing while Brent contracts for October, the new global benchmark, were seen 52 cents lower at $44.57 per barrel.