Global markets were lower on Friday, as US markets (S&P 500 Index -0.2%) slipped following a stronger than expected jobs data report.
The US non-farm payroll report showed the US economy added 582,000 jobs for the month, smashing estimates of 250,000 and bringing down the unemployment rate to 3.5%, its lowest level in 50 years. The strong result quashed the recent change in market sentiment that the Fed was going to be easing their rate hike path, with the market pricing another 75-point rate hike in September as ‘most likely’.
Bond yields rose, the 10-year US treasury yield jumped +14 basis points to 2.83%, while the 2-year rate reached 3.23%. The inversion (when short-term rates are higher than long-term rates) reached its largest gap of -40 basis points in 40 -years, indicating the current technical recession could play out into something slightly worse according to bond markets, with greater economic headwinds ahead.
The news also impacted equity markets, with consumer discretionary and tech shares leading losses. The NASDAQ index was down -0.5%, while these losses were offset by gains across the major bank and energy stocks.
European markets (Stoxx 600 Index, -0.8%) were down as tech stocks slid following the strong US jobs data release.
BHP (BHP:ASX)
BHP has offered $25 per share to acquire OZ Minerals a Copper and gold miner based with operations in Australia, and Brazil. The $25 per share acquisitions represent a +32% premium to what the shares had been trading on Friday, but well below its 12-month high of $29.75. However, Oz minerals board have rejected the offer determining that the proposal significantly undervalued Oz minerals and was not in the best interests of shareholders.
Regardless if the acquisition goes through, we remain Buy (High Risk) rated on BHP as it will continue to pay a healthy dividend over the near-term even in an event of a shallow to mild global recession.
Australia & New Zealand Market Movers
The Australian market (ASX 200 Index) was flat on a mixed day of trade Friday.
A rebound in tech shares following a strong lead from Wall Street was offset by the ASX’s two major commodity-facing sectors materials and energy which fell on softening commodity prices.
The New Zealand market (NZX 50 Index +0.2%) edged higher on another quiet day of trade Friday.
A2 Milk shares rose +2%, extending its weekly gains following the possibility of gaining FDA approval to sell its infant formula in the US. Fletcher Building edged +0.2% higher after the Commerce Commission said there was no blame on Fletchers for the recent spike in building products.
3 Things Markets will be Watching this Week
- Inflation prints in the US and China.
- Commidty prices with oil falling back below $100 a barrel.
- Locally, the focus will be on corporate earnings. Key names due to report this week include Aurizon, Suncorp, NAB Q3, REA Group, Computershare, CBA, AMP, QBE, Telstra, IAG and ResMed.
