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Equity Indices Retreat Amid Robust Wage Growth; Investors Eye Upcoming Inflation Data

Market Update - Daniel Ang The Accidental Trader Traders Academy International 8

Friday’s Wall Street trading concluded with notable retreats in major indices, prompted by the Labor Department’s employment data. While the U.S. economy showed a steady job growth trajectory, annual wage acceleration at 4.4%, exceeding forecasts, stoked inflation worries among investors. The Nonfarm Payroll report displayed a slight underperformance, adding 187,000 jobs last month against the expected 200,000. Concurrently, unemployment figures improved marginally to 3.5% from June’s 3.6%.

The Dow Jones Industrial Average and the S&P 500 respectively trimmed 0.4% and 0.5% off their values, effectively wiping out earlier upticks. Conversely, the tech-heavy Nasdaq Composite showed some resilience, shrinking by 0.4%, bolstered by Amazon’s impressive 8% ascend following robust sales and profit results that outpaced analyst predictions.

Earlier in the week, the unexpected downgrade of the U.S. from its sterling triple-A credit rating by Fitch rattled markets. The decision underscored the nation’s fiscal health, thrusting it under a harsh spotlight amidst the anticipated deluge of new Treasuries. With a projected borrowing volume surpassing $1 trillion in Q3, the benchmark 10-year yield experienced a sharp dip on Friday, although it managed to hover above the 4% mark, unseen since November 2022.

Investor focus in the upcoming week will zero in on U.S. inflation data. Market analysts are voicing concerns that a surge in the consumer price index could trigger up to a 5% contraction in the S&P 500.

The Dollar recorded a dip on Friday, shedding almost all of its weekly gains. The Dollar Index registered a 0.4% drop following Thursday’s high of 102.84, marking its most significant single-day loss in three weeks. As a result, the EUR/USD rose 0.55% to close at 1.1004, and the USD/JPY eased 0.51% to conclude the week at 141.81. The GBP/USD and AUD/USD saw minor upticks, boosted by an easing of trade tensions between China and Australia regarding barley imports.

In the commodities market, crude oil prices posted a sixth consecutive weekly increase, with Brent and WTI crude prices climbing 1.3% and 1.6% respectively, following extended supply cuts by Saudi Arabia and Russia. Gold prices were barely affected by the U.S. labor report, with December COMEX gold futures settling around $1,970/oz.

Cryptocurrency markets ended the week on a softer note, with Bitcoin (BTC/USD) trading just below $29,500 during early Asia trading hours. Ethereum (ETH/USD) remained flat over the weekend, presently exchanging around $1,833.

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