This report is from today's CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Moderating jobs growth
U.S. nonfarm payrolls grew by 187,000 in July. That's less than the Dow Jones estimate of 200,000 but is slightly more than June's downwardly revised jobs growth of 185,000. Unemployment dipped ten basis points to 3.5%, the lowest level since late 1969. All in all, it was a pretty good report for both workers and the Federal Reserve.
Bad week for U.S. stocks
Major U.S. indexes ended Friday in the red, giving the S&P 500 and Nasdaq Composite their worst week since March. Wall Street's bad showing dragged down Asia-Pacific markets Monday. China's Shanghai Composite fell 0.75% as traders braced for the country's trade data coming tomorrow, and inflation figures on Wednesday. Japan's Nikkei 225 squeezed out a 0.08% increase.
Rising oil prices
Oil prices hit a four-month high Monday. October Brent futures traded around $86.13 per barrel and September U.S. West Texas Intermediate futures were around $82.70 per barrel, both the highest since mid-April. Prices were pumped up by an attack on a Russian oil export hub and Saudi Arabia's extension of its oil production cut.
Tear down this tariff
Australia wants China to remove all trade barriers between both countries, the country's Trade Minister Don Farrell told CNBC on Monday. Farrell's comments come after Beijing lifted its tariff on Australian barley imports effective Aug. 5. The move highlights how bilateral tensions have thawed since the leaders of both countries met at the G-20 summit in Bali last November.
[PRO] Upsides amid a China downgrade
Morgan Stanley downgraded the MSCI China, an index that represents a range of mainland Chinese large- and mid-cap stocks. The bank's still cautious of growth prospects in the country despite the promise of more state support. Nonetheless, the bank added two stocks to its focus list, suggesting there are still pockets of optimism to be found in individual companies.
The bottom line
The U.S. economy's had an unbroken string of victories.
Job growth in July was lower than expected, which is what the Federal Reserve wants to see to get inflation down. But it wasn't so low that it'd spell trouble for workers or the economy.
"Overall, this is still not the picture of the labor market we would expect to see if the economy were in danger of decelerating dramatically in the short term, although without question there are signs of moderation," said Rick Rieder, chief investment officer of global fixed income at asset management giant BlackRock.
Indeed, the U.S. economy looks so healthy — a slowing but strong labor market, lower inflation readings and stronger-than-expected growth — that Wall Street's changing its mind about recession. JPMorgan's the latest bank to abandon its recession forecast. The country's biggest bank follows Bank of America, which called for a "soft landing, no recession," and Goldman Sachs, which lowered its probability of a recession from 25% to 20%.
Yet markets slumped Friday. The S&P 500 fell 0.53% and the Nasdaq Composite slipped 0.35%. That's the fourth straight loss for both indexes. The Dow Jones Industrial Average dipped 0.36%. Moreover, all indexes ended the week in the red. The S&P and Nasdaq slid around 2.3% and 2.9% respectively, their worst week since March. The Dow retreated 1.1%.
The disparity between the good economic news and the bad week in markets reminds us that, as much as there's a close relation between the two, they aren't the same.
Economic data measures and reports what has already happened. Whereas markets are alive, fueled by feelings and comprise bets on the future. What does this tell us? That traders aren't sure if the S&P can continue rallying — even if inflation data coming out this week is softer than expected. As Steve Sosnick, chief strategist at Interactive Brokers, put it, "The risk mentality is changing a bit."
