Samsung expects profits to rise, Labour victory in England and falling oil prices are among the news
Markets are awaiting the publication of the June nonfarm payrolls report in the United States, with expectations that the figures will show a possible softening in labor demand, which could fuel hopes for interest rate cuts in the Federal Reserve in this year.
On the corporate front, Samsung Electronics said it expects to see a 15-fold jump in Q2 revenue, thanks to increased demand for artificial intelligence.
In Brazil, the tax reform working group delivers the report regarding the regulation with changes to the text.
1. US Nonfarm Payroll
U.S. employers are expected to have added fewer jobs in June, potentially signaling a cooling in labor demand that could bolster the case for the Federal Reserve to start cutting interest rates, which are at more than 200-year lows, later this year.
Economists expect nonfarm payrolls to have increased by 191,000 jobs last month, down from 272,000 in May. Meanwhile, the rate of growth in average hourly earnings is expected to have slowed marginally to 0.3% from the previous month, and the unemployment rate is expected to match May’s 4.0% pace.
Data earlier this week showed private payroll growth slowed last month and the layoff rate, a gauge of labor market confidence, held steady, suggesting possible easing pressure on wages.
The steam being let out of the labor market could lead to less upward pressure on inflation, a trend that could support hopes the Fed will cut rates in 2024. The central bank has said it plans to lower borrowing costs just once this year as policymakers look for more evidence that price gains are moderating sustainably.
US stock futures pointed higher on Friday (5 July 2024) as investors awaited the release of a key monthly labor market report (more below).
At 0805 GMT, Dow futures were down 0.02%, S&P 500 futures were flat and Nasdaq 100 futures were up 0.16%. Wall Street’s major averages were closed for the Independence Day holiday on Thursday.
2. Samsung expects profit to increase
Samsung Electronics (KS:005930) is expected to post an exponential rise in its Q2 profit as the technology conglomerate was further boosted by demand for memory chips and electronic devices driven by artificial intelligence.
The world’s largest memory chip maker said on Friday its operating profit for the three months to June 30 likely rose to 10.4 trillion won ($7.50 billion), compared with a profit of 670 billion won for the same period last year.
The figure, the highest since Q3 2022, was well above revenue forecasts of 8.8 trillion won, according to LSEG SmartEstimate forecasts cited by Reuters.
Samsung’s better-than-expected earnings were driven by rising demand for memory chips from the AI industry, particularly high-bandwidth memory chips. Samsung said it will start mass producing advanced HBM chips starting this year, aiming to win more orders from Nvidia (NASDAQ:NVDA), its AI rival.
3. Labor Party victory
The changing political climate in the UK will be front and center for investors on Friday (5 July) after the opposition Labour Party secured a sweeping victory in a parliamentary election, ending 14 years of often turbulent Conservative rule.
The Labour Party, led by Keir Starmer, had won 410 of the 650 seats in parliament, giving it a large majority, with a handful of seats yet to be declared.
UK stocks gained, as did the pound, as investors appeared to judge that a period of intense market volatility, driven by political and economic turmoil under the Conservatives, may be coming to an end.
That said, the election also saw the rise of the right-wing populist Reform UK party, led by Brexit campaigner Nigel Farage.
This brings into focus the second round of voting in the French parliamentary election, due to take place on Sunday, following the success of the far-right National Rally in the initial vote last weekend.
4. Oil prices fall slightly
Oil prices fell close to the flat line on Friday (5 July) but were on track for a 4th consecutive positive week on hopes of strong summer fuel demand in the US.
At 8:05 a.m., U.S. crude oil futures (WTI) were down 0.12% at $83.78 per barrel, while the Brent contract was down 0.25% at $87.21 per barrel.
Oil rose this week on strong summer demand expectations in the U.S., the world’s largest oil consumer, with official data from the Energy Information Administration showing that the country’s crude and fuel inventories fell more than projected last week. Market sentiment was also supported this week by heightened geopolitical tensions in the Middle East.
5. Tax Reform in Brazil
The regulation of the Tax Reform is taking new steps, after the report was delivered by the working group this Thursday (July 4). The expectation is that the matter will be voted on in the Chamber of Deputies next week, and then considered by the Senate, before the parliamentary recess. The president Lula (PT) sent an official message to the National Congress requesting that the Complementary Bill be voted on urgently.
The regulation of the new tax framework underwent a series of changes in the text presented by the government. Parliamentarians included electric cars, betting and gambling in the “sin tax”but they removed the special charge on trucks. In addition, the reform will provide exemption for “nano-entrepreneurs”, for those who receive income in an amount equivalent to half that of individual micro-entrepreneurs (MEIs).
The Tax Reform combines five taxes (ICMS, ISS, IPI, PIS and Cofins) into one tax, which would be charged in the form of Value Added Tax (VAT), divided into IBS (Tax on Goods and Services) for states and municipalities, in addition to CBS (Social Contribution for Goods and Services) for federal charges. Projections indicate that the rate charged should be around 26.5%.
At 8:06 am (Brasília time), the EWZ ETF (NYSE: EWZ) was down 0.21% in pre-market trading.
With information from Investing Brazil.
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