Market Outlook – October 8, 2018

Wall Street Gets a Breather from Bond Yield

 

The start of this week is a respite for the U.S. stock market after being unsettled by the rise in bond yields last week. Trading resumes Monday but the bond markets are closed in observance of Columbus Day in the U.S.

The three main U.S. stock market benchmarks posted unsatisfactory milestones. It was the worst weekly decline since March 23 for the tech-heavy Nasdaq Composite Index as it dropped 3.2%. According to the Dow Jones Market Data, the Dow Jones Industrial Average recorded its sharpest two-session fall since June 19. The broader S&P 500 index experienced its most unpleasant back-to-back percentage loss since May 29.

Since the Monday is a bond-market holiday, bond traders are also on a break. The holiday is one of only two holidays where the equities-market and bond-market holidays separate.

On November 12, the stock market will close to observe Veterans Day. The bond market will be open for trading on this stock-market holiday.

U.S. Posts Lowest Unemployment Rate

 

While the 134,000 jobs added last September were below expectations, the jobs monthly average for the year came out to a robust 211,400 jobs. This revision from the previous two months’ gains to a combined 87,000 jobs boosted the average.

Further, the U.S. unemployment rate fell to 3.7% last month which is the lowest level since December 1969.  The Labor Department attributed the lower figures to Hurricane Florence. The employment is leisure and hospitality sectors went down slightly after trending upwards over the last several months.

Professional and business services emerged as the economy’s strongest sector, adding a cumulative 560,000 jobs over the past year. Interestingly, even with the newly-imposed steel and aluminum tariffs, the manufacturing sector added 18,000 new jobs. The National Association of Manufacturers cited the continued growth to regulatory rollbacks and tax cuts enacted in 2017.

Asian Markets Stumble as China Markets Reopens

 

China’s markets prepare to reopen following a week-long holiday but Asian shares stumbled in early trading on Monday. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down 0.3% after major stock markets across the globe fell for a second straight day on Friday. Shares in Australia are down 1% while there is no trading in Japan due to a holiday.

Investors are keeping their focus on the markets in China after the decision of the People’s Bank of China (PBOC) on the issue of reserve requirement for banks came out Sunday. They cut the level of cash that banks must hold as reserves in a bid to lower financing costs and spur growth. PBOC is concerned over the possible economic drag arising from the escalating trade dispute with the United States.

UK Wants Comcast’s Firm Assurance on Editorial Independence

 

U.K.’s culture minister Jeremy Wright is seeking additional reassurances from U.S. cable giant Comcast Corp. (CMSCA) over the editorial independence of the Sky News television channel.

Wright told Sky News, “I’ve left them in no doubt at all about the importance of editorial independence and Sky News, and what we expect not just over the immediate period following the changes to corporate ownership, but in the longer term.”

Comcast won in the long-running battle to acquire and take over the pay-TV group. The company beat Murdoch’s Twenty-First Century Fox (FOXA) via a rare auction hosted by U.K. regulators last month.

Although Wright thinks the previous reassurances by Comcast are persuasive, he wants to make certain they are ‘firm’ and that Comcast would take further steps to do so if necessary. “We want to make sure they are committed to Sky News in the long term and committed to its editorial independence.” he added.

Apple Found No Evidence of Hacking Attack

 

The top security offer of Apple Inc. (AAPL) wrote a letter to the Senate and House Commerce committees on Sunday regarding hacking attacks. Based on the letter by Apple’s Vice President for Information Security, George Stathakopoulos, Apple there are no signs of suspicious transmissions or other evidence of penetration through a sophisticated attack on its supply chain.

The U.S. tech giant has time and again been conducting investigations and found no evidence as claimed in a Bloomberg Businessweek article published last Thursday. The article also said that chips inside servers sold to Apple by Super Micro Computer Inc. allowed for backdoor transmissions to China.

The letter read, “Apple’s proprietary security tools are continuously scanning for precisely this kind of outbound traffic, as it indicates the existence of malware or other malicious activity. Nothing was ever found.”

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