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NFP Headline: Will It Be 25 or 50 bps This Month?

Stocks on Stand-by Ahead of NFP
U.S. stock markets consolidated again yesterday, closing mostly flat after Tuesday’s major losses. Labour data on Thursday, like Wednesday, indicated that the U.S. job market is slowing, raising expectations for significant Federal Reserve interest rate cuts in less than two weeks. ADP private payrolls significantly missed expectations, coming in at just 99k compared to the consensus of 144k. However, weekly unemployment claims were slightly better than expected at 227k vs. 231k, and Services PMI data was marginally higher at 51.5 vs. 51.4 last month. Today’s non-farm payrolls (NFP) data and speeches from Fed members Williams and Waller are crucial, as they are the last scheduled comments before the media blackout ahead of the FOMC meeting on September 17-18.

US Payrolls
The August non-farm payrolls data holds significant influence over the markets, especially after Federal Reserve Chair Jerome Powell stated that policymakers do not want further weakening in the labour market, setting the stage for imminent rate cuts. Analysts expect 160,000 new jobs and for the unemployment rate to dip to 4.2%. However, recent softer indicators suggest downside risks, with estimates varying—Citi expects 125,000, while Bank of America forecasts 200,000. The Fed is expected to cut rates this month, with CME futures showing a 59/41 split favouring a 25bp cut on September 18.

Geopolitical Concerns Continue to Escalate
The daily death toll in Ukraine and the Middle East continues to erode confidence in the likelihood of a near-term resolution to either conflict. In fact, rhetoric has worsened this week. The escalating situation in Ukraine, coupled with ongoing tensions in the Middle East, further undermines sentiment and investor confidence.

Market Talk
Overnight, market attention is focused on the upcoming U.S. jobs report. USD/JPY is down 0.9% at 142.20, hitting a low of 142.06 earlier, while USD/CHF has dropped 0.4% to 0.8405. European indices continue to slide after a soft opening, with S&P 500 futures down 0.7% and Nasdaq futures down 1.2%. U.S. bond yields are also falling, with 10-year yields dropping below 3.70%, down 3.8 bps for the day. The DAX is down 0.86% and the FTSE 100 is off by 0.64%. EUR/USD is at 1.1111, and GBPUSD (Cable) is at 1.3180.

BTCUSD is trading at $55,400 despite bullish remarks from former President Trump. USOIL remains below the critical $70.00 level for the fourth consecutive day, currently at $68.90, after briefly touching $68.35 again yesterday. Gold rallied to $2,523.50 and holds steady at $2,518 today.

Stuart Cowell,
Head of Education & Investment Research