Please see below article received from Brooks Macdonald this morning, which provides a global market update for your perusal.
What has happened
Markets on Thursday looked to be a little softer on balance, as investors held their breath ahead of an arguably pivotal US jobs report due later today. Remember that the last monthly US payrolls data was one of the principal catalysts for an economic growth scare, putting markets in a brief but violent tailspin in early August. Otherwise, Thursday saw a slightly better-than-expected US Institute for Supply Manufacturing (ISM) Services Purchasing Manager Index (PMI) for August, coming in a 51.5, where 50 is the dividing line between month-on-month economic expansion versus contraction. Given services makes up around three-quarters share of the US economy, it puts the recent weaker manufacturing print earlier this week in some perspective.
Looking for a better set of US payrolls
Later today, we get the latest (August) monthly US employment ‘non-farm payrolls’ report. After the weaker than expected print last month, markets are hoping for a better showing this time around. According to the median estimate of a Bloomberg survey of economists, payrolls are expected to have risen by +165,000 in August, following July’s +114,000 increase. As for the unemployment rate, that is expected to have edged down to 4.2%, versus the 4.3% print last month. As an aside, it is worth keeping in mind that, as we saw last month, it is quite possible for the payrolls to show net gains, and still see the unemployment rate higher – rather than a sign of weakness, it can actually be a positive, as the unemployment rate ticks up to reflect more people coming back into the workforce available to work, but while looking for a job, are initially classified as being out of work.
Oil price having a difficult week
In commodity markets, the oil price, at one point down nearly -8% for the week earlier today, looks to be on track for its worst weekly loss in almost a year. With the Brent crude oil price down at around US$ 73 per barrel currently, its lowest level since late last year, the driver for the price weakness appears to be a difficult softer-demand versus ample-supply outlook. That outlook is despite the latest announcement from the OPEC+ oil producing group yesterday (denoting the Organization of the Petroleum Exporting Countries, plus certain non-OPEC countries, including Russia), where following a virtual meeting, the group announced that it would delay planned longer-term production increases (as part of unwinding their previous production curbs) by two months.
What does Brooks Macdonald think
There is an awful lot riding on the US employment report later today. Last month’s weaker than expected print could arguably be put down, in part, to the extreme weather disruption caused by hurricane Beryl. For context, readers will remember that this hurricane was the earliest-in-the-year maximum category-5 hurricane to ever be recorded in the Atlantic basin. There is no such weather excuse this time around. Instead, markets will want to see some reassurance that after some mixed jobs reports data of late, that the US economy is still doing relatively okay. In terms of what is currently being priced in for US interest rate cuts later this month (at the US Federal Reserve meeting decision due 18 September), markets are pricing in around 35 basis points of cuts, so still between either a 0.25% cut or a larger 0.50% cut.
Bloomberg as at 06/09/2024. TR denotes Net Total Return.
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Chloe
06/09/2024