Markets Await August Employment Data, Company and Market News

Market reviews

• Whatever the U.S. jobs report shows on Friday, it is bound to have an impact on markets. Such is the strength of the August nonfarm payrolls data, especially after Federal Reserve Chairman Jerome Powell made it clear that policymakers do not want to see the labor market weaken further, paving the way for a possible rate cut.

• Analysts expect new payrolls to rise by 160,000 and the unemployment rate to fall to 4.2%. However, a recent series of soft interim data points to the downside, fueling speculation about a possible big 50 basis point rate cut on Sept. 18.

• Futures currently suggest a 40% chance of a 50 basis point cut, and a weak report would likely double that chance while pushing bond yields down significantly. On the other hand, a near-expectation or strong report would likely kill the chance of a 50 basis point cut, which would hurt stocks, although a 25 basis point cut looks set to happen regardless of the numbers.

• While the employment data will dominate markets' attention, investors may also look for clues about the outlook for U.S. rates from two prominent Fed officials, Governor Christopher Waller and New York Fed President John Williams, who will speak later in the day. Either way, this will likely be the day that decides the fate of a possible 50 basis point rate cut by the Fed.

• There is recession risk for stocks. A weak report could raise the odds of a big rate cut, but it would also stoke recession fears, and it is unclear what will ultimately prevail in market sentiment. There are also many complications for the Japanese yen. A weak report could see it break key resistance at 141.66 per dollar and hit its highest level this year, while a strong report would likely erase the 2% gain seen this week.

Oil is facing one of its worst weeks in more than a year. Upbeat news on U.S. inventories has failed to boost a market that appears more concerned with economic woes. Brent crude really needs a strong jobs report to avoid falling below $70 a barrel.

• Trading saw little change in Asian stocks on Friday, although Taiwan outperformed with a 1% gain. Bonds held their footing this week and the dollar suffered losses. Nasdaq futures were down 0.5% while Europe was set for a muted open, with EUROSTOXX 50 futures up 0.1% and FTSE futures down 0.1%.

• U.S. Treasury Secretary Janet Yellen said Thursday the country still has a “good, healthy labor market,” although the pace of job creation has slowed in recent months. Yellen told reporters in North Carolina that the unemployment rate was 4.3% in July, a three-year high and still very low by historical standards.

• U.S. services business activity expanded at a moderate pace for the second month in a row. The ISM services PMI beat expectations at 51.5 in August, while the services employment indicator fell to 50.2 from 51.1 in July.

• The US labor market is sending mixed signals. The number of applications for unemployment benefits fell from 231 thousand to 227 thousand. The total number of applications that fell was 1838 thousand, although an increase to 1870 thousand was expected. However, the increase in the number of people employed according to ADP was only 99 thousand against the expected increase of 144 thousand people. In addition, the estimate for the previous month was revised from +122 thousand to +111 thousand. We will keep an eye on today's data.

• Crude oil futures are down despite OPEC+ confirmation that members will delay by two months plans to begin unwinding additional voluntary output cuts. OPEC said members that were overproducing have confirmed their plans to offset the 2.2 million barrels a day of voluntary cuts to be phased out starting in December, “with the ability to pause or reverse adjustments as needed.” The phase-out schedule calls for member countries to increase output by 180,000 barrels a day in December and gradually increase over the next year.

• Natural gas futures jumped about 5% to a seven-week high on Thursday on a smaller-than-expected build in inventories, higher gas flows to liquefied natural gas export plants and continued production declines this month.

• On the Chicago Mercantile Exchange, wheat for December delivery fell 1% to $5.75 a bushel as grain traders abandoned short-covering that had helped push prices higher. Corn for December delivery fell 0.5% to $4.10 1/2 a bushel. Soybeans for November delivery rose 0.3% to $10.24 1/2 a bushel.

• Following the August sell-off, the US dollar may face greater downside risk. The Federal Reserve will begin cutting interest rates in September, and a potential easing of global financial conditions could also act as catalysts for further declines in the dollar. Given the downward trend in US 10-year Treasury yields BX:TMUBMUSD10Y following the Fed’s first rate cut, global financial markets are likely to weaken further. The US dollar could weaken further as other central banks, especially those that cut interest rates ahead of the Fed, can now allow the Fed to do some of its job and indirectly support the global economy outside the country.

• Health care stocks were lower Thursday afternoon, with the NYSE Health Care Index down 1.5% and the Health Care Select Sector SPDR Fund (XLV) down 1.2%. Five current and former AstraZeneca employees have been detained in China on suspicion of illegally collecting patient data and importing an unapproved liver cancer drug, media reported Thursday. AstraZeneca shares fell 3.2%.

• FedEx said Thursday it is scaling its fulfillment operations with the help of e-commerce fulfillment technology company Nimble's fully autonomous 3PL model. FedEx is also investing in Nimble as part of the partnership.

• ChargePoint shares fall 18% after tough quarter. The electric-vehicle charging company reported a loss of 16 cents per share for its fiscal second quarter ended July 31, in line with Wall Street forecasts, according to FactSet. Revenue of $108.5 million fell short of the $113.5 million analysts had forecast. The company also said it would cut its global workforce by about 15%.

• Yext is up over 10%, posting its biggest percentage gain since June 2023.

• A private equity consortium including Vista Equity Partners and Blackstone is in talks to acquire Smartsheet, an American collaboration software maker with a market value of about $7 billion.

• Christopher Scott Buchanan, chief operating officer and director of Bitcoin Depot, sold 20,000 shares of Bitcoin Depot's Class A common stock for a total sale price of $31,218. The shares were sold at a volume-weighted average price of $1.5609, with prices ranging from $1.52 to $1.62. Following the transaction, Buchanan directly owns 241,276 shares of Bitcoin Depot.

• Bank of America shared confidential information with some investors ahead of a share sale in India, according to The Wall Street Journal on Thursday.

• Billionaire Larry Ellison to gain control of Paramount. CBS, the parent company of Paramount Global, will be controlled by billionaire software developer Larry Ellison after Skydance Media completes the purchase of the Redstone family's stake in the film and TV company. Ellison will own 77.5% of National Amusements, Paramount Global's controlling shareholder, through a trust and a number of corporations.

• Zimmer Biomet falls as it expects software platform issues to hurt revenue. Shares of medical device maker Zimmer Biomet fell ~9%.

• Bill Gates claims that artificial intelligence will change society much more radically than all previous scientific and technological discoveries. In his opinion, AI technologies have no limits: society's productivity will grow so rapidly that in a few decades, authorities will be forced to radically revise the tax system and working hours.

• JPMorgan changed its recommendation on China shares to neutral from overweight. The China situation is interesting to study, so it's worth reading the latest issue of The Economist over the weekend.

• BMW and Toyota are planning to launch hydrogen-powered cars. The auto giants hope that joint development and procurement of components will help reduce costs and make the technology more competitive. Serial production will begin in 2028.

• The US government may launch an investigation into Chinese marketplaces Temu and Shein. Two representatives of the US Consumer Product Safety Commission in an open letter called for an examination of the companies' compliance with US safety standards. They drew particular attention to the use of the "de minimis" rule, which exempts goods worth up to $800 from duties.

• US Steel shares fell 25% on Biden's plans to block the Nippon Steel deal. US Steel warned of possible plant closures if the deal approved by shareholders does not go through.

• IT company EPAM Systems has acquired consulting company NEORIS. The deal is expected to close in the fourth quarter of 2024, which should expand EPAM Systems' presence in North America and Europe, as well as create a market proposition for local clients.

• Over $3.65 billion has entered the market via the USDT stablecoin in the last 30 days. Over 96% of NFTs are considered “dead,” with the average NFT lifespan being just 1.14 years. 43% of NFT owners are losing money, losing an average of 44.5% of their investment. 2023 has been the worst year for NFTs, with nearly a third of tokens going dormant. Amid this crisis, Tron founder Justin Sun is proposing to revive the NFT market on the Tron blockchain, promising to solve problems with high fees, scaling, and poor user experience.

• Changpeng Zhao has been permanently removed from the management of Binance. This was confirmed by the current head of the world's largest crypto exchange, Richard Tang.

• Tesla plans to launch "autopilot" in China and Europe in 2025. The company is working hard to get the necessary regulatory approvals, and shares are rising on the news.

• China's zinc woes are getting worse. Zinc smelters in the country are being forced to cut production sharply due to weak demand and processing fees that have fallen to minus $35 a tonne for imported concentrate. China, which produces about half the world's refined zinc, has already cut output due to losses, but that has not been enough to stabilise the market.

• Chinese e-commerce giant Alibaba is launching a credit card in the U.S. as part of its strategy to expand overseas amid slowing domestic sales. The card will allow U.S. cardholders to earn rewards on all their Alibaba purchases in the form of cash back or special financing terms, according to a statement.

• McKesson shares fell nearly 10% in late trading Thursday after the company said at a healthcare conference it expects adjusted fiscal second-quarter profit of $6.70 to $7 per diluted share.

• Ford cars will collect data about drivers to offer them topics of interest. The company has filed a patent for technology to display advertising in cars based on personal preferences. Soon, advertising will be shown through built-in screens, and the system will take into account user preferences, offering, for example, favorite gas stations or favorite routes.

• QUALCOMM says it is working with Samsung and Google to develop mixed reality smart glasses. OpenAI is considering raising subscription prices to $2,000 a month for more advanced versions. The company currently has 1 million paid users of the business version of ChatGPT.

• U.S. bank profits rose 11% in the second quarter of 2024 amid cost cuts. The country's banking system earned $71.5 billion in the quarter, up 11.4% from the previous quarter, according to a report from the Federal Deposit Insurance Corp.

• Shares of Applied Digital surged 65% after a deal with investors. The data center operator said it would raise $160 million from a group of investors including Nvidia.

• Aramco and Trafigura are competing for Shell assets in South Africa. Saudi Aramco, Abu Dhabi National Oil Co. and commodities trader Trafigura are among those bidding to buy Shell Plc's gas stations in the region.

• CBOE Launches Platform for Traders Looking to Access Private Markets CBOE is partnering with a London-based technology company to create a U.S. trading platform for privately held stocks, a traditionally illiquid market that investors are increasingly seeking access to.

• YouTube has introduced a new set of AI detection tools to protect creators, including artists, actors, musicians and athletes, from having their likenesses, including their face and voice, copied and used in other videos.

• Ford sales rose 13.4% in August, driven by demand for SUVs and pickups. U.S. auto sales totaled 182,985 units, driven by strong demand for SUVs and pickups. Ford's electric vehicle sales rose 28.9%, while hybrid sales jumped nearly 50%.

• Salesforce (CRM) announced a deal to acquire cloud startup Own Co. for about $1.9 billion in cash. Own specializes in data protection and management solutions and was valued at $3.5 billion in 2021. Salesforce now owns about 10% of the company.

• Kellogg (KLG) shares rose 10% yesterday on expectations of improving sales.

• Costco Wholesale posted another strong performance, with the only weakness coming from gas prices. Same-store sales rose 5% in August from a year ago, down slightly from 5.2% in July. Excluding gas price and currency fluctuations, the company's overall same-store sales were up 7.1% year over year. Shares remain flat.

• NIO shares rose 14% yesterday after the Chinese electric vehicle maker reported a narrower-than-expected second-quarter loss. Shares rose 10% this morning after the report, while DOCU rose 1%.

Key events that could impact markets on Friday:
- German industrial production for July, German trade data
- Revised eurozone GDP for Q2
- US nonfarm payrolls for August
- Speeches by Fed Governor Christopher Waller and New York Fed President John Williams

International Reviews

• ABC has approved and released the final rules for the debate between US presidential candidates Kamala Harris and Donald Trump. The debate participants will have almost the same opportunities as the Biden-Trump debate.

• China plans to invest billions in Africa. At the opening of the Forum on China-Africa Cooperation in Beijing, Chinese President Xi Jinping announced plans to invest 360 billion yuan ($50 billion) in African countries. According to Xi, Beijing plans to hold joint military exercises with African countries, develop green energy projects and send medical personnel to Africa. At the same time, China will open its market to African countries and plans to trade with them without customs duties in the future.

• Macron has appointed a new French prime minister, the former head of the Brexit negotiating team. Barnier must form a new government, as France has been with a caretaker cabinet for 51 days.

• India is lagging behind smaller rivals in manufacturing, Bloomberg reports. India’s share of global trade has not kept pace with its fast-growing economy, and the country is falling behind rivals like Bangladesh and Vietnam as low-cost manufacturing export hubs. Specifically, India’s share of global exports of clothing, leather, textiles, and footwear rose from 0.9% in 2002 to a peak of 4.5% in 2013, but has since declined to 3.5% in 2022. At the same time, Bangladesh’s share of global exports of these goods reached 5.1%, while Vietnam’s share was 5.9% in 2022.

• Poland plans to strengthen governance of state-owned companies, avoids privatisation. Poland's government has no plans to privatise major assets despite significantly increasing the state's role in the economy. The new state assets minister, Jakub Jaworowski, will focus on improving corporate governance and giving minority investors more control over state-owned companies.

• The US, EU and UK have signed the world’s first international legally binding convention on artificial intelligence. The agreement, developed by the Council of Europe, emphasizes the importance of human rights and democratic values ​​in regulating AI. The convention provides for liability for harm or discrimination caused by AI systems and protects citizens’ rights to equality and privacy.

• Canadian Prime Minister Justin Trudeau faces a vote of no confidence over the failure of Liberal policies. The New Democratic Party (NDP) recently pulled out of an agreement with the Liberal Party to vote together on key issues in exchange for support for opposition initiatives.

• Senate panel to question U.S. semiconductor companies on use of semiconductors in Russian weapons. The Senate Permanent Subcommittee on Investigations announced Thursday that it will hold hearings with four major semiconductor companies on the use of U.S.-made semiconductors in Russian weapons used in the war in Ukraine.

• Hunter Biden has unexpectedly pleaded guilty to avoid a tax investigation months after being convicted of illegally possessing a firearm. The president's son is accused of a four-year scheme to evade at least $1.4 million in taxes.

• Donald Trump told a gathering of business leaders that housing affordability and reducing inflation would be his top priorities if he returns to the White House. Trump wants to cut mortgage rates from nearly 7% to 3% and possibly lower, saving the average homebuyer thousands of dollars a year. Among other proposals, Trump also highlighted a cut in the corporate tax rate to about 15%. He has proposed cutting the corporate tax rate to 15% for companies that make products in the U.S., creating a sovereign wealth fund, and taking unused money from programs passed by the Biden administration, such as the Inflation Reduction Act and expanded enforcement funds for the Internal Revenue Service. Trump reiterated his plans to introduce cryptocurrency, increase import tariffs to 10% to 20%, and extend 2017 tax breaks for companies and wealthy individuals.

• Elon Musk has been tapped to head a new federal efficiency commission. Musk said: "I look forward to serving America if the opportunity arises. No pay, no title, no recognition required."