News updates from July 5: US economy adds 206,000 jobs; Keir Starmer appointed UK prime minister

Wall Street’s main equities gauges closed at record highs for the third consecutive session to notch their biggest weekly gains in just over two months.

The benchmark S&P 500 rose 0.5 per cent on Friday, with technology the best performing sector. The Nasdaq Composite gained 0.9 per cent as every Magnificent Seven tech group except Nvidia finished higher.

The weekly gains for the two indices were their largest since late April. The tech-heavy Nasdaq, which advanced for the fifth week in a row, has now closed higher in 10 of the past 11 weeks.

Treasuries rallied as yields fell in response to an official jobs report that showed signs of a softening US labour market. The yield on the 10-year Treasury note dropped 0.07 percentage points to 4.28 per cent. The two-year note’s yield fell 0.09 percentage points to 4.60 per cent.

Donald Trump has distanced himself from the conservative policy blueprint prepared by a right-wing think-tank, which had proposed ways to reshape the federal government if a Republican candidate was elected president in November.

“I know nothing about Project 2025,” the former president said Friday on Truth Social, referring to the title of the blueprint, which had been created by the Heritage Foundation.

“I have no idea who is behind it. I disagree with some of the things that they’re saying and some of the things they’re saying are absolutely ridiculous and abysmal,” Trump continued.

Heritage Foundation president Kevin Roberts on Tuesday said Americans are in the process of “carrying out the second American Revolution”.

Trump’s comments will probably be viewed as an effort to distance himself from the more radical elements of the Republican party and appeal to more moderate voters in the run-up to the election.

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Big Tech stocks dragged Wall Street’s main equities indices to record highs, as investors also assessed the latest data showing signs of a softening US labour market.

The benchmark S&P 500 was up 0.5 per cent during Friday afternoon trading, with technology the best performing sector. The Nasdaq Composite gained 0.9 per cent as every Magnificent Seven tech group except Nvidia advanced.

Big Tech stocks did the heavy lifting for the indices, though, with about 60 per cent of members in the S&P 500 trading in the red.

Soft details within June’s non-farm payrolls report raise the risks around an economic slowdown, which would have a bigger impact on domestically focused companies.

Treasuries rallied as yields fell. The yield on the 10-year Treasury note dropped 0.07 percentage points to 4.28 per cent. The two-year note’s yield fell 0.08 percentage points to 4.61 per cent.

London-listed large cap stocks fell and gilts rallied on Friday after Labour claimed its first election victory since 2015.

London’s FTSE 100, which includes many international and overseas companies, closed 0.5 per cent lower, erasing gains from earlier in the session. In contrast, the FTSE 250 index of domestically focused mid-cap stocks advanced 0.9 per cent.

Gilt prices climbed after the election result. The yield on the 10-year UK bond fell 0.07 percentage points to 4.13 per cent.

European stocks slipped, with the region-wide Stoxx Europe 600 ending the session down 0.2 per cent. France’s Cac 40 lost 0.3 per cent ahead of the second round of legislative elections this weekend and Germany’s Dax gained 0.1 per cent.

The price of bitcoin fell below $54,000 on Friday, the lowest level since February, as traders braced for a flood of sales from defunct Japanese exchange Mt Gox.

The cryptocurrency slipped as much as 8 per cent to below $54,000 before recovering to trade at $55,604 by mid-morning in New York. The move takes bitcoin’s decline from a mid-March peak of around $73,000 to 26 per cent.

Analysts have said the possible return of $9bn of bitcoin to investors by Tokyo-based Mt Gox, which was once the world’s biggest cryptocurrency exchange but filed for bankruptcy in 2014, has fed the sell-off.

Wall Street stocks made small gains on Friday after the latest US jobs report showed signs of a cooling labour market.

The blue-chip S&P 500 added less than 0.1 per cent in early trade in New York, rising to a fresh record high. The tech-dominated Nasdaq Composite rose 0.2 per cent.

The moves came after figures showed the unemployment rate rose to 4.1 per cent in June from 4 per cent in May, marking the latest in a number of weak economic data releases over the past week. 

“This job report could provide the Federal Reserve with the confidence to reduce interest rates in September,” said Florian Ielpo, head of macro at Lombard Odier Investment Managers. 

US Treasury yields dropped and stock futures rose following the release June’s payrolls data, which traders bet could allow the Federal Reserve to cut interest rates twice this year. 

The two-year Treasury yield, which moves with interest rate expectations, fell 0.06 percentage points to 4.63 per cent, its lowest level since early April, after the release that showed the US added 206,000 jobs in June, higher than the 190,000 forecast, as traders in the futures market added to expectations of how many times interest rates may be cut this year. Investors are now fully pricing in two interest rate cuts in 2024, with the first coming in November. 

S&P 500 futures rose on expectations of looser monetary policy.

Here is what to look out for in the US today:

Jobs: The US labour market is expected to have slowed in June, but economy watchers will be poring over this morning’s non-farm payrolls report for clues on how this might influence the Federal Reserve’s deliberations over interest rate cuts this year. Economists expect the US economy to have added 160,000 jobs last month, down from 272,000 in May, and for the unemployment rate to hold steady at 4 per cent.

Biden: The viewing time for the US president’s much-anticipated television interview with ABC News has been brought forward to primetime this evening. ABC had planned to air its interview, which is to be taped on Friday morning, on Sunday. But the network decided to accelerate the release, reflecting the increasing importance of the event and the continued uncertainty around whether Joe Biden will remain the Democratic party’s presidential nominee for the 2024 election.

Sir Keir Starmer has become Britain’s new prime minister after winning a historic Labour majority of more than 170 seats.

Starmer travelled to Buckingham Palace at midday on Friday and was invited by King Charles to form a government, as he prepared to lead the first Labour administration since 2010.

Labour’s massive victory at Westminster saw the centre-left party win 412 seats, largely at the expense of Rishi Sunak’s Conservatives, who collapsed to the worst defeat in the party’s history. Nigel Farage’s Reform UK swallowed up Tory votes, leaving the Conservatives with just 121 seats. Labour was able to win its majority with only 34 per cent of the vote, the lowest-ever winning share.

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Germany has sent another American-made Patriot air defence system to Ukraine to help the country shore up its defence of cities and critical infrastructure from Russia’s intensifying missile and drone attacks, according to Berlin’s ambassador in Kyiv.

“The third Patriot air defence system from Germany has arrived in Ukraine,” ambassador Martin Jaeger wrote on X. “It will help improve the protection of the population and infrastructure.” 

He said the Ukrainian crew that will operate the advanced weapon system “has successfully completed appropriate training in Germany”.

Ukraine has pleaded with its western partners to provide additional air defence systems after Russia’s air strikes destroyed more than half of the country’s power generation capacity, causing nationwide emergency shutdowns.

Ukraine now has at least five Patriot systems operating in the country. The Biden administration is in talks with Israel to acquire and send to Kyiv as many as eight others, the Financial Times previously reported. 

The European housing market recovered in the first quarter, as falling residential property prices in Germany and France were offset by strong growth among countries in the south and east of the region.

EU house prices rose 0.4 per cent in the first three months of the year, rebounding from a 0.3 per cent decline in the previous quarter, data from Eurostat showed on Friday. 

House prices continued to fall among the smaller group of Eurozone members, but their 0.1 per cent quarterly decline was much slower than a 0.8 per cent fall in the previous quarter.

Denmark had the biggest fall with prices dropping 2.5 per cent in the first quarter. French prices fell 2.1 per cent and Germany had a 1.1 per cent decline. But these were offset by strong rises in eastern and southern countries, including Bulgaria, Hungary, Poland, Lithuania, Norway and Spain.

Meanwhile Eurozone retail sales rose slightly less than forecast in May, increasing 0.1 per cent from April and 0.3 per cent from a year earlier.

Housebuilding companies led a UK stock rally on Friday as a landslide Labour victory sparked optimism the party will roll out a pledge to build 1.5mn homes over the next five years.

Persimmon was up 3 per cent in early morning trading, closely followed by Barratt Developments up 2.4 per cent and Taylor Wimpey up 2.3 per cent. The FTSE 250 index of domestically focused mid-cap stocks was up 1.2 per cent.

David Cumming, head of UK equities at Newton Investment Management, said the UK would be seen as an “oasis of calm”, adding that housebuilding stocks “particularly should benefit”, based on Labour’s policy for planning reform.

Germany’s governing parties have reached a deal on the 2025 budget after months of wrangling that presented Olaf Scholz with one of his toughest challenges since becoming chancellor in 2021.

The deal came after intense negotiations overnight between Scholz, the Green deputy chancellor Robert Habeck and finance minister Christian Lindner, leader of the liberal FDP, the smallest party in Scholz’s three-way coalition.

The three parties also agreed on a “growth turbo”, a package of measures to boost private investments, in part through more generous tax writedown rules. 

The deal paves the way for a more detailed draft budget, which should be adopted by Scholz’s cabinet later this month and sent to the Bundestag.

German factory output fell 2.5 per cent in May from the previous month, much worse than the 0.2 per cent rise forecast by economists in a Reuters poll.

The figures released on Friday meant German industrial production was 6.7 per cent down from a year ago and more than 11 per cent below pre-pandemic levels after big declines in autos, machinery and equipment output as well as construction in May. 

“These numbers aren’t pretty,” said Claus Vistesen at Pantheon Macroeconomics, predicting German production fell 1 per cent in the second quarter despite a likely rebound in June.

But on a three-month rolling basis, industrial activity was unchanged and some analysts said a high number of bank holidays may explain part of the weakness in May.

UK property prices edged down in June, according to data by the lender Halifax that reflects some volatility in the mortgage market in early 2024.

House prices fell 0.2 per cent between May and June following two months of no change and taking the average price to £288,455, figures published on Friday showed.

The average house price was still 1.6 per cent higher than in June last year, the same annual rate as in May.

House prices have been volatile in 2024 as mortgage rates fell sharply in January from their peak in the summer of 2023, but have edged up again since February.

Shares in HDFC Bank, India’s largest private lender, dropped on weak loan and deposit growth as the company’s financial metrics continue to take hits after last year’s megamerger with its mortgages arm.

Shares dropped 4.3 per cent in Mumbai trading, the biggest single day decline since India’s shock election result in early June. It was the top loser on the benchmark Nifty 50 index after preliminary figures showed a sequential 0.8 per cent fall in gross loans and flat deposit growth last quarter.

“While HDFC Bank’s balance sheet course correction is underway, we believe this process will be gradual,” Nomura analysts wrote in a note.

Shell said it would take a hit of up to $1bn on a stalled plant in Rotterdam that was intended to convert waste into jet fuel and biodiesel. 

On Tuesday, the oil major paused work on the project, a key part of its energy transition plans, to reassess “project delivery” amid a difficult market for biofuels. It estimates the pause will cost $600mn to $1bn.

The plant, which was given the green light in 2021, was already behind schedule because of technical difficulties. Originally scheduled to start production in April, Shell said earlier this year it would be operational “in the latter part of the decade”.

Shell’s market guidance for the second quarter said its renewables business would earn between minus $500mn to $100mn in the quarter. 

Bitcoin dropped more than 7 per cent on Friday while South Korean equities led gains in Asian markets.

The cryptocurrency dropped to $54,445 per bitcoin after hitting a record high of $73,794 in March. The fall comes as gold, a more conventional store of value, remains close to its record highs reached in May.

In equity markets, South Korea’s Kospi index led gains in the region as most Asian bourses dropped.

On Friday two of the country’s largest electronics manufacturers, Samsung Electronics and LG Electronics, reported strong quarterly earnings. Samsung upgraded its profit forecast on expectations of strong demand from artificial intelligence companies.

Hong Kong-listed shares of Robosense, a Chinese start-up backed by BYD, slumped 64 per cent on Friday, as a six-month lock-up period for shareholders expired. 

The Shenzhen-based company, which develops laser sensors for autonomous vehicles, raised HK$985mn (US$126mn) in its initial public offering earlier this year.

An investment arm owned by the local government subscribed to almost 80 per cent of the shares as a cornerstone investor.  

Robosense, which counts carmakers Geely, Xpeng and Huawei-backed Aito as clients, reported a Rmb131mn net loss for the first quarter. 

Hong Kong’s IPO market has experienced its quietest first half since 2003 amid weak investor confidence in China-related assets. 

South Korean equities led gains in Asia after strong earnings releases from two of the nation’s largest electronics manufacturers on Friday morning.

The country’s benchmark Kospi index rose 0.9 per cent in early trading.

Shares of Samsung Electronics, South Korea’s largest listed business, rose 1.5 per cent after the company forecast a 15-fold increase in profits due to demand for artificial intelligence driving up memory chip sales. LG Electronics also reported strong earnings.

In currency markets, the Australian dollar rose 0.1 per cent against the US dollar to A$0.67. Traders are betting that Australia will have to hold or even raise interest rates as a result of stubborn inflation even as the US begins to cut rates.

Events: Japan’s foreign minister Yoko Kamikawa begins an official visit to Cambodia.

Economic data: Thailand and Taiwan announce June inflation data. India, Indonesia and Malaysia are among countries publishing their latest foreign reserves data as the region’s currencies face continuing selling pressure from a strong US dollar. Singapore releases retail sales figures for May.

Corporate updates: LG Electronics announces quarterly earnings.

Over the weekend: Tokyo will elect its governor on Sunday, ending a two-week race between incumbent Yuriko Koike, backed by Japan’s ruling Liberal Democratic party, and her main challenger, Renho Saito.

Samsung Electronics expects a more than 15-fold increase in second-quarter operating profit, as memory chip prices continue their recovery from last year’s slump on strong demand for artificial intelligence.

The world’s largest maker of memory chips by sales estimated on Friday that operating profit jumped 1,452 per cent to Won10.4tn ($7.5bn) in preliminary numbers for the April-June quarter, the highest since the third quarter of 2022.

That was much better than analysts’ expectations of Won8.8tn, according to LSEG SmartEstimates. Sales increased 23 per cent to Won74tn from a year earlier.

Demand has surged for advanced D-ram chips, such as high bandwidth memory chips used for training AI models and those used in data centres. 

Brazilian police have recommended criminal charges against Jair Bolsonaro after a probe into alleged misappropriation of jewellery by the former president and his aides while in office, according to an official familiar with the case.

The case involves luxury gifts worth millions of dollars, including a white gold Rolex watch, cufflinks and gold-plated ornaments, presented during official trips to Saudi Arabia and Bahrain.

Under Brazilian law such donations should enter the public collection, but police investigators claim presidential assistants illegally diverted the items. Prosecutors must now decide whether to formally indict the former president.

The development deepens the legal woes enveloping Bolsonaro, president from 2019 to 2022. He has denied any wrongdoing.

Sir Keir Starmer’s Labour party is heading for a massive majority of about 170 seats at the UK general election, according to a national exit poll that indicated Rishi Sunak’s Conservatives will crash out of office after 14 years.

The poll on Thursday night suggested Starmer will become prime minister with 410 seats out of 650 in the House of Commons while Sunak’s party is facing the worst result in its history with just 131 seats.

The result will resonate around the world: the UK’s political dial has swung back to an internationalist, centre-left party as rightwing populists are advancing in many countries.

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Joe Biden has said he “screwed up” during his debate with Donald Trump, but insisted he would press ahead with his re-election bid despite mounting pressure to step aside.

“I had a bad night,” Biden told a local radio station in Wisconsin in a pre-recorded interview that aired on Thursday morning. “And the fact of the matter is that, you know, I screwed up. I made a mistake.”

The US president added he was “going to win this election”, repeating a line he has used frequently since last week’s disastrous debate: “When you get knocked down, you just get back up.”

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The US believes there is a “significant opening” to finalise a deal between Israel and Hamas to halt the nine-month war in Gaza and secure the release of Israeli hostages held in the strip, according to a senior administration official.

Speaking after US President Joe Biden held a 30-minute phone call with Israeli Prime Minister Benjamin Netanyahu on Thursday, the official said “we have had a breakthrough on a critical impasse”.

The official cautioned that a deal was not “going to come together in a period of days”, but added that “we do believe there is a pretty significant opening here”.

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