In August, the U.S. economy added 142,000 nonfarm jobs, missing the Dow Jones forecast of 161,000 but better than July’s revised 89,000. The unemployment rate dropped slightly to 4.2% from 4.3%, and the labor force grew by 120,000.
On Friday, U.S. stock markets fell, with the Nasdaq Composite dropping 2.55%, ending the week over 10% below its record high. Asian markets continued the downward trend on Monday, with Japan’s Nikkei 225 falling about 0.7%. This drop followed news that Japan’s second-quarter GDP growth was 2.9% annually, lower than the 3.2% expected.
China saw a 0.6% increase in prices year-over-year in August, below the 0.7% expected. Additionally, China’s producer price index fell by 1.8% year-over-year. Yi Gang, former head of China’s central bank, said the country needs stronger fiscal and monetary policies to tackle these issues.
The Japanese yen has been strengthening against the U.S. dollar and might rise further due to lower U.S. yields. Kathy Lien from BK Asset Management warns this could lead to a reduction in the yen carry trade, where investors borrow in yen to invest in higher-yielding assets.
JPMorgan has downgraded its view on Chinese stocks due to ongoing deflation, a struggling housing market, and weak consumer demand. However, the bank still finds some Chinese stocks worth considering.
Market Trends vs Economic Reality What’s Next?
Last Friday, the S&P 500 fell 1.73%, the Dow Jones dropped 1.01%, and the Nasdaq Composite lost 2.55%, making it a tough week for U.S. indexes. Big Tech stocks like Nvidia, Alphabet, and Amazon were particularly hard hit, with each falling around 4% on Friday.
Despite the market’s recent struggles, economic data presents a less bleak picture. August’s job growth was better than July’s, and the unemployment rate improved. The futures market suggests a 71% chance of a small rate cut by the Federal Reserve in September, indicating that economic conditions might not be as severe as the stock market’s decline suggests.