Week in Review: Positive Jobs Report Confirms US Recovery

The U.S. economy added 850,000 jobs in June versus economists’ estimates of around 700,000, the most in 10 months. The unemployment rate, however, rose to 5.9% against the 5.6% expectation. Hospitality continued to be the prime beneficiary of the reopening accounting for as much as 40% of the gains as workers returned to jobs at bars, restaurants and hotels. Wage gains also accelerated with average hourly earnings increasing 0.3% for the month and 3.6% year over year.

More than 22 million Americans were laid off in March and April of 2020 amid government-imposed business restrictions, with the total employment level remaining 7 million short of its pre-pandemic level.

On Thursday the Democratic-controlled U.S. House of Representatives approved a $715 billion surface transportation and water infrastructure bill.  The bill authorizes spending for roads, bridges, highway safety, electric vehicle charging stations, rail, transit, drinking and wastewater infrastructure. The 221-201 vote sends the legislation to the Democratic-led Senate.

European equity markets remained subdued on worries of increasing inflation and the increasing spread of the highly infectious delta variant. The rise in infections came even as Europe had vaccinated 60% of its adult population with at least one dose in June and was on track to reach 70% in July, data from the European Centre for Disease Prevention and Control showed.

In local currency terms, the pan-European STOXX Europe 50 Index was down 0.88% while the UK’s FTSE 100 Index gave up 0.18% of its value.

In contrast major US indices continued to move to new highs amid favourable economic data, the passing of the latest infrastructure bill and positive sentiment around the recovering labour market. The Dow Jones (+1.02%), S&P 500 (+1.67%) and Nasdaq (+1.94%) were all up strongly on the week.

Japan’s Nikkei 225 Index ended the week down 0.97% on continuing concerns around rebounding coronavirus infection rates and the possible extension of restrictions currently in place. Chinese stocks were also down on the week with the Shanghai Composite Index ending the week 2.46% in the red.

Oil prices remained near their two year highs after officials at the OPEC+ meeting struggled to reach an agreement on production output.

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Market Moves of the Week

On Tuesday the Constitutional Court ruled that former President Jacob Zuma was in contempt of court and handed down a 15-month sentence. He was given until Sunday to submit himself to be taken into custody. On Friday the former President made an urgent application to the high court in Pietermaritzburg to stay an order to turn himself in by Sunday or be arrested, and to interdict the police from arresting him pending his rescission application to the Constitutional Court. Given the heightened tensions, the ANC’s weekend national executive committee (NEC) meeting was postponed

SA saw its highest ever number of single-day Covid-19 infections on Friday, with 24,270 new cases recorded in 24 hours. Gauteng again led in terms of new daily infections, accounting for 14,198 cases. The Western Cape was next with 2,606 cases. While Gauteng remains the epicentre of the Covid-19 pandemic, acting health minister Mmamoloko Kubayi-Ngubane has warned that many provinces in the country are almost at red alert as infections continue to increase. Over 120,000 people were vaccinated in the last 24 hours, with KwaZulu-Natal leading the pack, followed by Gauteng, then the Eastern Cape and Western Cape.

The SA Health Products Regulatory Authority (Sahpra) has given the go ahead for the use of the CoronaVac Covid-19 vaccine, which is manufactured by the Chinese biopharmaceutical company Sinovac. CoronaVac is administered as two doses, with the second dose administered between 14 and 28 days after the first dose.

On Friday airline operator Comair, operators for Kulula and British Airways, temporarily suspended all flights for the next three weeks following the adjusted level 4 lockdown and prohibition on all non-essential travel in and out of Gauteng.

The JSE All Share Index ended the week slightly up +0.16%, with all the major sectors moderately stronger over the week, except for the financial sector. By Friday close, the rand was trading at R14.25 to the U.S. Dollar after touching the R14,50 level earlier in the day.

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Chart of the Week

Nonfarm payrolls jumped by 850,000 last month, bolstered by strong job gains in leisure and hospitality, a Labor Department report showed Friday. The unemployment rate edged up to 5.9% because more people voluntarily left their jobs and the number of job seekers rose.

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