Trading Day – US jobs report exceeds expectations and Buffett’s Berkshire posts a second-quarter loss

The US jobs report for July showed an increase in new jobs of 528 000, almost double the expectation. Wage prices also rose more than expected, and markets are pricing in a higher likelihood of another 75 basis point rate hike from the Fed in September.

Warren Buffett’s Berkshire Hathaway showed a $53 billion second-quarter loss amid the recent market downturn, but operating earnings are up 38% from last year.

Here is the biggest news of the day.

• US Jobs report shows no signs of recession but points to potential further inflation. Nonfarm payrolls rose 528 000, almost double the expectation of 258 000. The unemployment rate came in at 3.5%, back to the pre-pandemic level and the lowest since the 1970’s. Average hourly earnings rose 0.5% for the month compared to an expected 0.3%. On an annualized basis this translate to wage inflation of 6%, rather than the expected 3.6%. The Fed will likely keep a close eye on the jobs and CPI report this month and in September before their next meeting. Markets are already pricing in a higher likelihood of another 75 basis point hike following the release.
• The Bank of England has hiked their interest rate by 50 basis points to 1.75%.
• Berkshire Hathaway reports big increase in operating earnings, but makes a loss on investments. The company posted operating earnings of $9.3 billion for the second quarter, showing a 38.8% increase year-on-year. However, due to the market downturn, the company showed a $53 billion loss on investments. Warren Buffett urged investors not to focus on quarterly fluctuations in investment gains and losses, calling the number “usually meaningless”. The conglomerate slowed its pace of share buybacks and still sits on a massive cash pile of $105 billion, despite increased deal-making activity.
• Master Drilling guides to higher earnings. The company released a trading statement for their 6-month results, indicating expected earnings per share of around R1.37, up more than 50% from R0.87 last year. Their interim results are expected to be released on 30 August.
• Alviva guides to higher earnings. The company released a trading statement for their 6-month results, indicating expected earnings per share of around R6.09, up more than 120% from R2.67 last year. Their interim results are expected to be released on 28 September.
• JSE suspends trading for Luxe and Afristrat, for failing to submit their annual reports within the required four-month period following its year-end.
• AYO Technology Solutions (AYO) and African Equity Empowerment Investments (AEE) might be doing a deal. While neither company provided any details, both of them issued cautionary announcements at exactly the same time. AYO is considering an acquisition, while AEE announced potential disposal.