A quiet start to a turbulent stock market week, a weekend in America and a political fiasco in Germany
Market reviews
• It was a quiet start to the month, with holidays in the US and Canada sapping liquidity ahead of a flood of data culminating in US employment data on Friday. Wall Street and European stock futures were little changed.
• Asian PMIs were solid for August, with China's Caixin jumping to 50.4, beating expectations of 50.0, although it also showed the first decline in new export orders in eight months. However, Chinese shares still fell, weighed down by losses in the property sector. Japan's PMI also improved to 49.8, with business investment picking up in the second quarter. Markets are still betting the BOJ will hold off on raising rates in October, although the meeting is just before the end of the month and there will be much more data by then. As long as the Nikkei doesn't collapse, they may want to get back on the path to policy normalisation.
• On the Fed side, markets are betting that the size of the September rate cut could hinge on the payrolls report, as Chairman Powell has been adamant that they do not want to see further weakening in the labor market. A result in line with the +165,000 and 4.2% forecasts would likely further reduce the likelihood of a 50 basis point cut, although it would take an extremely strong report to get markets to back off from a 25 basis point cut. Forecasts range from +100,000 to +208,000 and 4.1% to 4.4%, and anything like the latter would reignite recession talk and leave investors looking for a half-point rate cut. Futures are 100% for 25 basis points and 31% for 50 basis points.
• Fed Chairman Christopher Waller and New York Fed President John Williams spoke after the release of the employment data, prompting an almost immediate market reaction.
• Also important this week will be the ISM surveys, JOLTS data on job openings and ADP employment, trade and the Fed's Beige Book.
• The Bank of Canada is expected to cut its interest rate on Wednesday, with markets pricing in a 22% chance of a 50 basis point cut given signs of the economy stabilizing in July.
• The euro gained little from far-right victories in Germany's state elections, adding a new layer of political uncertainty over the fate of the EU. The euro settled at $1.1050, with support at $1.0948. The dollar was down slightly at 146.00 yen after an early high of 146.60.
• Oil, Bitcoin and Chinese stocks are under pressure in the morning. US index futures are neutral.
• U.S. markets are closed for Labor Day on Monday, and then attention will turn to the labor market inputs due later in the week.
The August jobs report on Friday will be the main economic release of the week, as investors try to discern whether signs of a slowdown in the July jobs report were overdone or an early warning of a broader slowdown.
Job openings and private payrolls are also due, as well as a test of activity in the services and manufacturing sectors
• Streisand effect hits Brazil: Despite bans and fines, Brazilians have started downloading X. The social network even topped the list of top apps. The Streisand effect is a phenomenon in which an attempt to hide or remove information leads to its widespread distribution.
Bill Ackman says X ban will make Brazil a 'non-investment market'
The billionaire has joined critics of the court's decision to suspend Elon Musk's X in Brazil, saying the decision will likely alienate investors and hurt the country.
• Mastercard plans to abandon passwords and verification codes when paying, and instead switch to biometric authentication - Bloomberg.
• American bank Chase started giving away free money by accident due to a technical glitch. The internet noticed that ATMs accepted counterfeit checks and allowed any amount to be cashed before processing was completed. A massive "gold rush" began, and people withdrew huge amounts. The bank tried to urgently impose restrictions, but TikTok users had already managed to withdraw millions.
• European stocks' bid to outshine US markets is fading fast - Bloomberg - The promise of European stocks to gain an edge over their US peers is fading after a brief period of outperformance as worries about slowing economic growth weigh on profit prospects.
• Companies are developing new ways to grow cocoa and chocolate alternatives to meet demand - AP Climate change is harming tropical forests where the highly sensitive cocoa bean grows, but chocolate lovers should not despair, say companies exploring other ways of growing it.
• Trump NFT collection fetched $2M despite slow market. Experts, however, warn buyers against selling too quickly.
• BlackRock's Bitcoin ETF lost $13.5 million in its first outflow since May, a move that came as the price of Bitcoin plummeted.
• Google (GOOGL) has updated its Chrome search engine
to include:
- Google Lens image search (usually searches for related products)
- and Gemini communication via the address bar (just start your search with @).
• Defense contractor RTX Corp. has agreed to pay a $200 million fine to settle U.S. government charges that it violated export controls by transferring sensitive technology to countries including China, Russia, and Iran.
• Telegram had $400 million in cryptocurrency on its balance sheet as of early 2024 - FT. It is not known what these tokens are, but Pavel Durov has publicly said that he only holds Bitcoin and TON.
• Bitcoin's Crypto Market Dominance Has Risen to 56% Since hitting its low in November 2022, Bitcoin's dominance has grown from 38% to 56%. Despite price volatility, long-term holders remain confident and continue to accumulate coins.
• U.S. steel industry leaders have high hopes for a rebound in 2025. U.S. steel industry executives say they are optimistic that demand for industrial materials will rebound next year, recovering from the weak demand and low prices that held back the industry in 2024.
• Amazon to hire founders of robotics software maker Covariant to expand warehouse automation
• China's troubled solar industry may be approaching a turning point. Chinese solar power makers have just endured a bloodbath of a profit season, but there are early signs that the glut plaguing the industry may be starting to ease.
• OpenAI Names Policy Veteran Lehane as Global Policy Lead - NYT Lehane, who is a member of OpenAI's executive team, was a former Airbnb policy lead and a member of the Clinton White House. Getting Ahead of the Curve? ... There's going to be a lot of politics, indeed.
• Coinbase has completed its first crypto transaction between two AI agents. Coinbase CEO Brian Armstrong sees the deal as “an important step toward getting AI to do useful work.”
Key events likely to impact markets on Monday:
S&P Global PMIs for Germany, France, UK and EU.
Opening statement by ECB Banking Supervisor Claudia Buch at a hearing of the European Parliament's Committee on Economic and Monetary Affairs.
International Reviews
• Chancellor Olaf Scholz's ruling coalition suffered defeat in two regional elections in eastern Germany on Sunday.
Populist parties of the far right and left won about half of the votes in both Thuringia and Saxony.
The head of the Alternative for Germany in Thuringia demonstratively arrived at the polling station in a Russian Niva. Here, the AfD took first place in the German state elections for the first time in its history (33%).
• Steinmeier called for a step-up in the fight against illegal migration. The knife attack in Solingen struck the country "in the heart", the German president said at a memorial service for the victims of the attack. He called for a step-up in the fight against illegal migration, in particular a more consistent approach to accepting asylum seekers.
• "Serbia is not Moscow's 'Trojan horse' in Europe": Vucic publicly disavows ties with Putin. According to Vucic, he has not met with Putin since the start of Russia's full-scale war against Ukraine.
• Poland's president insists on reparations for the 1939 German invasion. "Forgiveness and acknowledgment of guilt are one thing, compensation for damage is another," Andrzej Duda said in a speech in Wielun, Lodz Voivodeship, Poland, on September 1, the 85th anniversary of Nazi Germany's invasion of Poland.
• The Unbowed France party, which won the early parliamentary elections in July as part of the left-wing New Popular Front bloc, has initiated the impeachment procedure against French President Emmanuel Macron - Deutsche Welle.
The reason is Macron's refusal to appoint economist Lucie Castet, whose candidacy was proposed by the left, to the post of prime minister.
• Montenegro has given up tourists from Russia for the sake of EU membership, - the country's president, Jakov Milatović, speaking at the annual security conference in Prague, Globsec.
"I was the Minister of Economy for about two years. Five years ago, 30% of our income from tourism came from Russia. For me, as the Minister of Economy and a member of the government, it was difficult to impose sanctions against Russia and follow the decision of the European Council.
It was difficult, but we did it."
• A Chinese Coast Guard ship has rammed a Philippine vessel three times in the South China Sea, Reuters reports. The Philippines says the incident occurred despite no provocation from the Philippines, PCG Commander Jay Tarriela said in X.
• Kamala Harris has called on her Republican rival Donald Trump to debate with microphones on throughout the event - Reuters. Harris and Trump have agreed to the debate, which will take place on ABC News on September 10.
• South Korea's exports rose for an 11th straight month. But the pace of growth was slower than the previous month on market expectations as demand for computer chips slowed and auto sales remained sluggish.
• Israel's largest union called for a general strike on Monday to pressure the government for a ceasefire in the Gaza Strip after Israel said it had found the bodies of six hostages.
• Japan's Defense Ministry has requested a record budget due to the threat from China. The sum in question is 8.5 trillion yen ($59 billion). The defense ministry has requested this amount of money in connection with the growing threat from China
• Putin, money and guns prompt rethink of Swiss neutrality - Politico An explosive report published by a group of experts recommends that the government of a country that has been neutral since 1515 work to build "joint defense cooperation" with the EU and NATO.
• Elon Musk said he would "start publishing a long list of Alexandre de Moraes' crimes" in response to a Supreme Court judge's decision to ban X in Brazil.
• Armenia has frozen its participation in all CSTO bodies for now and is not going to make any other decisions. Armenian Prime Minister Nikol Pashinyan stated this at a press conference.
• The authorities of several African countries have begun to shoot elephants and hippos due to hunger. The authorities have officially approved a plan to shoot 723 wild animals: 30 hippos, 60 buffalos, 300 zebras, 83 elephants and 250 antelopes of various species. The animals will be selected from national parks with a “stable amount of game”, and their meat will be distributed to those affected by severe drought. The authorities received 57 tons of meat from the 157 killed animals.
• Japan wants its hard-working citizens to try a 4-day workweek. Japan, a nation so hard-working that it has a term in its language that literally means "work yourself to death," is trying to solve its labor shortage by convincing more people and companies to switch to a four-day workweek.
• More Hong Kongers are turning away from the news as they adjust to Beijing's growing influence. Three years ago, the Hong Kong government effectively forced Apple Daily and the Stand News to cease operations. Among the city's last news outlets that were openly critical of the government, their demise was seen by many as a sign that the old Hong Kong was a thing of the past.
• Weak Chinese manufacturing PMI adds to pressure on consumer stimulus. Factory activity in China fell to a six-month low in August as factory prices fell and owners scrambled for orders, an official survey showed on Saturday, prompting policymakers to press ahead with plans to pump more stimulus into the economy.
• Harris and Trump offer starkly different views on climate change and energy. As the Earth scorched during a summer that included four of the hottest days on record, the candidates have different plans for combating climate change while ensuring reliable energy supplies.
• Venezuela has for the first time handed over Colombians who fought for Ukraine to Russia - Politico. The fighters, who served in the Foreign Legion in Ukraine, were arrested during a layover in Caracas (Venezuela) when they were returning home. In Russia, they face up to 15 years in prison.