Major US indices retreated on Friday after the August jobs report came in short of expectations with the U.S. economy creating 235,000 jobs in August, a sharp deceleration from previous months and fell well below economists’ expectations for 733,000 positions. Still, the number of job openings remains at record levels, and hiring is expected to stay solid in the coming months.

The unemployment rate fell to a new pandemic-era low of 5.2% from the 5.4% recorded in July.

Friday’s report provided numerous signs that the delta variant had a depressive effect on job growth with leisure and hospitality jobs, which had been the primary driver of overall gains at 350,000 per month for the past six months, stalled in August as the unemployment rate in the industry ticked higher to 9.1%.

Also, wages continued to accelerate, rising 4.3% on a year-over-year basis and 0.6% on a monthly basis. Estimates had been for 4% and 0.3% respectively. If the jobs data gets softer, that could prompt Fed officials to wait until 2022 before starting to taper its bond purchases maintaining its loose monetary policy for longer.

Data on Tuesday showed euro zone inflation accelerated more than forecast to 3% in August—up from 2.2% in July. Higher energy and food prices drove the increase, according to the EU’s statistics agency.

European shares were marginally stronger on the week with the pan-European STOXX Europe 50 Index ending the week 0.26% higher while the UK’s FTSE 100 Index was -0.14% lower.

News of Prime Minister Yoshihide Suga’s resignation contributed to a strong rally with the Nikkei 225 Index soaring 5.38%. Suga’s popularity has plummeted in recent months amid mounting criticism of his governments handling of the coronavirus pandemic. Former foreign minister Fumio Kishida has emerged as the early front-runner, a year after he was defeated by Suga in the contest to replace Shinzo Abe.

Chinese stocks rose for a second consecutive week with the Shanghai Composite Index gaining 1.69% for the week. On Thursday, President Xi Jinping announced the launch of a new stock exchange in Beijing. The bourse will serve innovative small and medium-sized enterprises (SMEs) and is part of a reform of Beijing’s New Third Board.

Market Moves of the Week:

South Africa’s top court dismissed an application by the Electoral Commission to postpone local elections due on Oct. 27, court documents showed on Friday. In its ruling, the court set aside the government’s decision to have elections on Oct. 27, saying instead the polls must go ahead between that date and Nov. 1.

The ANC plans to use Friday’s Constitutional Court order to argue that the Electoral Commission of SA (IEC) must reopen the candidate registration process. The party failed to register hundreds of candidates for the election, meaning it cannot participate in more than a third, of SA’s 278 municipalities.

In company news, Discovery announced the introduction of mandatory Covid-19 vaccinations for its staff from next year, the announcement is expected to pave the way for other large companies to follow suit.

The FTSE/JSE All Share Index closed -1.88% lower on the week, as losses in the resources sector (-5.81%) drove the overall index lower. The rand strengthened further on Friday as the big miss on the U.S. jobs report boosted emerging-market currencies. The rand had gained strongly against the US dollar earlier in the week, after a dovish speech by Fed Chair Jerome Powell at Jackson Hole last Friday suggested that the U.S. central bank was in no rush to raise interest rates.

Chart of the Week:

The US added 235,000 payrolls in August, badly missing the median estimate of 733,000 added jobs. The unemployment rate dropped to 5.2% from 5.4%, in line with estimates. Jobs data is important because that is one area where Fed Chairman Jerome Powell said they would like to see more improvement before the central bank can decide to slow its bond purchases. It now appears unlikely that the Fed will announce a taper at the September meeting but possibly look to its November meeting to start reducing its asset purchases.

Whilst volatility is likely to continue amid current market uncertainty over the coronavirus disease, our message to all investors remains the same – stay calm in making decisions that are aligned with your long-term goals, not current market conditions. In any market environment, we strongly believe that investors should stay properly diversified across a variety of asset classes and that clients financial plan supports their long-term goals, time horizon and tolerance for risk.

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