Good morning. North American markets are slowly churning back into gear after the unofficial end of Summer. The Labor Day festivities kicked off on Friday morning with a rather subpar non-farm payrolls report. It was reported that the US created only 151k jobs in August, against expectations of 180k. The US dollar’s reaction has been somewhat mixed since the announcement, initially falling but rallying into last week’s close on better than expected trade balance figures. The G20 Summit in China didn’t yield any substantial announcements. World leaders discussed many things over the long weekend, including the Syrian conflict and the more broad battle with ISIS, but nothing concrete was broadcast and markets seemingly overlooked the meetings. Overnight, the Reserve Bank of Australia kicked off a busy month for policymakers, deciding to keep its main cash rate firm at 1.5%. Later this week we have the European Central Bank meeting, to be followed later this month by the Federal Reserve, Bank of Japan and Bank of England.
The Australian dollar jumped 1% on Tuesday, as equities were flat digesting the local central bank’s decision to keep rates firm at 1.5%. The RBA cited sustained growth, lower inflation, and mixed labor data as important elements as to their decision to keep the main rate steady. It was a fairly quiet session to be honest with markets keeping a low profile with the US and Canada off on Monday. Some policy chatter from Japan garnered a bit of attention as a close adviser of Prime Minister Abe suggested perhaps the Bank of Japan should hold off on any new policy until after the Federal Reserve has decided what it wants to do. Japan’s government and central bank continue to jawbone in the media over policy, uncertain what to do next to generate sustained economic growth. A number of key data releases tomorrow will give markets a better indication of where Japan’s economy stands through the second quarter, with the BoJ slated to meet on the 20th.
Crude oil prices jumped overnight after it was announced Russia and Saudi Arabia had agreed to “cooperate” in the stabilization of the oil market and output. Unfortunately, those gains were short-lived as it appears no specifics over output production caps was announced as well. European markets continue to trend higher, boosted by a number of data announcements showing both the UK and mainland Europe performing well post-Brexit. On Friday, it was announced that the UK’s service industry bounced back hard in August following a sharp decline in productivity for July. Sterling is now more than 5% above the Brexit lows and is higher again today, both versus the euro and the dollar. German Finance Minister Schaeuble was on the wires overnight, repeating claims that rates remain too low in Europe, with unemployment current at a 25 year low. With federal elections underway in Germany, Mr. Schaeuble said the country is in position to cut taxes by 15 billion euros as his Christian Democrats party falls further in the polls. German manufacturing orders rose by 0.2% in July it was reported, following a -0.3% dip in June. The European Central Bank meets this Thursday, no change in rates is expected to be announced.
U.S. stocks futures are pointing to a higher open this morning, boosted by the Russia-Saudi announcement which has so far given riskier assets a bit of energy. On the calendar this morning, markets will be keying in on the final Markit services PMI and the ISM-non-manufacturing PMI. To be released at 9:45am and 10am, markets are forecasting 50.9 and 55 respectively for both important economic indicators. Looking out over the next few days, markets will get a look at the Fed’s Beige Book tomorrow and earning’s season finishes up as well. Weekly jobless claims on Thursday and speeches by the Fed’s Williams and Rosengren pace the latter half of the week. The Bank of Canada concludes their latest policy meeting tomorrow, expecting to keep rates firm at 0.5%. Canada’s central bank is unlikely to move on monetary policy and wait for the Federal Reserve, which is meeting Wednesday, September 21st. The Loonie has performed well since Friday’s NFP report, edging higher by more than 1% since the announcement, and continuing to rise as oil’s been jolted overnight. The data calendar is busy this week up north, with the central bank announcement to be followed by building permits, capacity utilization, and the August employment report.
Have a great week.
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