Top 5 Things to Know in the Market on Friday, August 7th

By Geoffrey Smith

Investing.com -- The U.S. labor market report for July is due, with job gains expected to slow sharply from June's level. President Trump ratchets up the pressure on TikTok owner ByteDance and on squabbling lawmakers as the deadline for a new coronavirus relief bill draws closer. Uber (NYSE:UBER)'s losses widened sharply in the second quarter, and Europe's V-shaped recovery still looks intact for now. Here's what you need to know in financial markets on Friday. August 7th.

1. Job growth set to slow sharply

The U.S. releases its official labor market report for July, amid expectations that net job creation slowed sharply as a number of key states such as California, Texas and Florida all froze or partially reversed their reopening measures during the month.

The consensus forecast is for a net rise of 1.60 million in nonfarm payrolls, down from the record-high 4.80 million in June. The evidence of ADP’s payrolls number on Wednesday suggests a high risk of revisions to the June number.

Economists point out that the employment numbers are likely to be inflated by the statistical process of seasonal adjustment.

“It will adjust for the fact that some workers lose their jobs over the summer, by adding some jobs that don’t really exist,” UBS Global Wealth Management chief economist Paul Donovan said in a morning briefing. “That’s a sensible approach, normally. However, jobs that would normally be lost over the summer were actually lost several months ago, so the seasonal adjustment process will be adjusting for a change that doesn’t exist.”

2. Trump cracks down on TikTok, WeChat

President Donald Trump signed an executive order banning U.S. residents from transacting with video service TikTok and its owner Bytedance, citing concerns about the security of U.S. users’ data.

Trump also issued a similar ban on Chinese messaging app WeChat, but didn’t extend the ban to the app’s U.S.-listed owner, Tencent Holdings (OTC:TCEHY). That didn’t stop Tencent’s stock falling by 5.0% in Hong Kong.

U.S. citizens have 45 days to comply with the ban. The Chinese English-language news site Global Times labelled the move “a shameless act of hegemony.”

Coincidentally, China’s trade surplus - the initial cause of Trump’s hostility to the country and its companies - surged in July to its second-highest monthly total ever, as exports recovered while the price and volume of energy imports stayed at depressed levels.

3. Stocks set to open mostly lower ahead of jobs report; Uber's losses widen

U.S. stock markets are indicated to open lower Thursday, as index futures consolidate ahead of the labor market report, against a backdrop of ongoing uncertainty over the next coronavirus relief package for the economy.

By 6:30 AM ET (1030 GMT), the Dow 30 futures contract was down 130 points or 0.5%, while the S&P 500 futures and Nasdaq 100 futures contracts were down in parallel.

Stocks likely to be in focus in early trading include Uber, whose underlying loss widened in sharply in the second quarter as ride volumes collapsed by 75% year-on-year. Revenue was sustained by its food delivery business Uber Eats, where bookings more than doubled – albeit without generating any profit for the company. CEO Dara Khosroshahi repeated his target of breaking even at an adjusted EBITDA level by the end of next year.

4. Deadline draws near for stimulus package

The fate of the next coronavirus relief bill is still hanging in the balance, after Democrats and Republicans failed to make any real headway on talks ahead of their self-imposed deadline of the end of the week.

““We’re still a considerable amount apart in terms of a compromise that could be signed into law,” White House chief of staff Mark Meadows told reporters after a meeting with Democratic Party leaders.

President Trump has said he may use executive actions to extend the flow of jobless benefits, and a partial moratorium on evictions. He is also sticking with the idea of suspending payroll taxes, although lawmakers on both sides have warned the measure will be ineffective.

5. Europe's recovery still intact

Europe’s V-shaped recovery story gained a bit more credence with stronger-than-expected rebounds in industrial production in Germany, France and Spain in June.

The figures suggest that economic momentum picked up markedly toward the end of the quarter, as lockdown measures were lifted and factories – especially in the auto sector – resumed production.

In the U.K. meanwhile, house prices broke a four-month losing streak with a 1.7% gain in July, according to mortgage lender Halifax. The country’s biggest online real estate agent, Rightmove (OTC:RTMVY), said customer traffic to its site had broken records on 65 of the 81 days since the government announced the relaxation of lockdown measures and a temporary waiver of stamp duty on home sales.

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