CNBC Daily Open: Jobs growth slowed down. Markets shot up

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.

Bonanza profits for UBS
Net profit for UBS hit $28.88 billion in the second quarter, far higher than the $12.8 billion expected. That’s the Swiss bank’s first quarterly earnings since it acquired Credit Suisse. Earlier this month, UBS announced it had terminated a 9 billion Swiss franc ($10.24 billion) loss protection agreement with the Swiss government, suggesting the bank’s integration of Credit Suisse is going smoothly.

Job creation slowed
Job growth in the U.S. slowed to 177,000 in August, according to payroll company ADP. That’s fewer than economists’ expectation of 200,000 — which is itself already much lower than July’s downwardly revised 371,000. It’s a sign the effects of high interest rate are starting to be felt, giving traders hope the Federal Reserve might pause hikes.

Markets regain ground
U.S. stocks rallied Wednesday on the back of weaker-than-expected economic data, giving the S&P 500 a four-day winning streak. Asia-Pacific markets traded mixed Thursday. Japan’s Nikkei 225 rose around 1% as data showed retail sales for July jumping 6.8% year on year, sharply higher than the expected 5.4%. But China’s Shanghai Composite lost 0.5% as economic data disappointed again.

Mixed signs in China
China’s factory activity in August shrank for the fifth straight month, but at a slower pace than July. Non-manufacturing activity expanded for the month, but dipped to its lowest level this year. Meanwhile, retail sales in August experienced a marked increase compared with July, according to the China Beige Book’s survey of Chinese businesses.

[PRO] China plus three
Amid a prolonged downturn in China’s economy, investors are growing bearish on the stock market. But this could be an opportunity for investors to put their money into other Asian markets, analysts say. Here are the three Asian markets analysts recommend — and the best ways to play them.

Bad news is good news again for markets.

Markets last week were gripped by the fear that interest rates will remain high — or go even higher than they already are — in the face of an unyieldingly strong economy and stubborn inflation. (Recall how the 10-year Treasury yield, which typically reflects rate expectations, hit a 16-year high last week.)

Those worries dissipated somewhat Wednesday.

New data showed that economic growth, while still hot enough to suggest a soft landing, was not quite as scorching as previously thought. Second-quarter gross domestic product the U.S. was revised downwards from 2.4% to 2.1% on an annualized basis.

Moreover, job creation for August was lower than expected. In another encouraging sign that inflation might be moderating, pay growth for workers slowed, regardless of whether they changed jobs or stayed in their current positions, according to ADP.

“This month’s numbers are consistent with the pace of job creation before the pandemic,” Nela Richardson, chief economist at ADP, said in a press release. “After two years of exceptional gains tied to the recovery, we’re moving toward more sustainable growth in pay and employment as the economic effects of the pandemic recede.”

In sum, there’s hope the Federal Reserve might loosen its grip on monetary policy, based on the weaker-than-expected economic data. Markets cheered the news.

The S&P 500 rose 0.38%. It might seem a small figure, but it’s statistically significant for a few reasons: One, it gives the index a four-day winning streak; two, it helped the index close above 4,500, breaking a key psychological barrier; three, it helped to trim August’s losses to around 1.6%, down from an intraday low of 5.53% on August 18. The Dow Jones Industrial Average inched up 0.11% and the Nasdaq Composite climbed 0.54%.

For tomorrow, look out for the personal consumption expenditures index, which measures how much consumers spent in July. If inflation numbers come in soft, then that completes the trifecta of data — economic growth, jobs and inflation — that the Fed wants to see slow down. Then markets can probably heave a sigh of relief, for now.