Please see below the latest ‘Daily Update’ from EPIC Investment Partners, which covers their views on recent events in markets and was received this afternoon (05/10/2023):
In what may be the first signs that the US’s tight labour market could be loosening, companies on the other side of the pond added the fewest number of jobs since the start of 2021 last month, along with pay growth slowing. Private payrolls rose 89k in September after climbing 180k the month before, versus a market consensus of 150k, according to figures by the ADP Research Institute in collaboration with Stanford Digital Economy Lab. Annual wage growth slowed to 5.9%, the 12th consecutive monthly decline.
Nela Richardson, chief economist at ADP said: “We are seeing a steepening decline in jobs this month. Additionally, we are seeing a steady decline in wages in the past 12 months”. Within the numbers virtually all jobs added came from leisure and hospitality, whist there were job losses in professional and business services, transportation and utilities, along with manufacturing. ADP’s performance as a predictor of the overall economy is patchy, however, it’s one to be aware of.
It has also been reported that US 30-year fixed mortgages topped 7.5% for the first time since the turn of the century. According to the Mortgage Bankers Association, fixed rate mortgages rose 12bp to 7.53% at the end of September. From there, borrowing costs have continued to rise this week, with the Mortgage News Daily, which updates more frequently, putting 30-year fixed deal at 7.72% on Tuesday. Of course, this has a knock effect and consumer demand is starting to dry up. The purchase index which measures mortgage applications for the purchase of a home fell 5.7% from a week ago, with purchase applications at their lowest level since Apollo 13 was released.
One market that is moving in the opposite direction from its recent highs is oil, which dropped sharply again today, with West Texas now trading below $85 per barrel, down from over $93pb last week. As we have recently discussed, oil has been grinding higher since its near $70pb low in June on continued supply side deficiencies, particularly on the back of OPEC supply cuts. However, the selling has been driven by a change in demand side dynamics. The US Energy Information Administration (EIA) released their crude oil inventory report yesterday, which showed the four-week average of implied gasoline demand fell to the lowest level in 25 years for this time of year, whilst oil exports from the US soared. There were also supply-side drivers as well, as Cushing Oklahoma crude stockpiles rose slightly after seven straight weeks of decline.
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Carl Mitchell – Dip PFS
Independent Financial Adviser
05/10/2023