Global markets await US economic data

by Andre Janse van Vuuren

Stocks retreated as traders prepared for data releases that will offer insight about the health of the US economy and the Federal Reserve’s interest-rate path.

Europe’s Stoxx 600 slipped 0.2% as mining equities declined on the back of softer commodity prices. US contracts pulled back ahead of Wall Street’s reopening following the Labor Day holiday, while a gauge of Asian stocks was little changed.

In what is historically a poor month for stocks, traders are bracing for fresh bouts of volatility. In the runup to the start of the Fed’s rate-cutting cycle, investors are wary of risks stemming from US election campaigning and rising geopolitical tensions. 

The publication of US manufacturing data later Tuesday will mark the start of a busy week of economic reports, culminating with nonfarm payrolls statistics on Friday. A similar series of releases in August induced fears that the US economy was heading for a hard landing, whiplashing markets.

“We do expect higher volatility over coming weeks,” said Mohit Kumar, chief economist for Europe at Jefferies International. Central banks “are data dependent and markets’ expectations of their response function is likely to whipsaw around data releases.”

Markets are currently pricing a start to US policy easing this month, with a roughly one-in-five chance of a 50 basis-point cut, according to data compiled by Bloomberg.

In currencies, the yen rallied after Bank of Japan Governor Kazuo Ueda reiterated that the central bank will continue to raise interest rates if the economy and prices perform as expected. 

The dollar extended modest gains of the previous two trading days. Treasury yields were little changed.

Oil fluctuated as traders weighed concerns over China’s dour economic outlook against supply disruptions in Libya.

Corporate Highlights:

• Cathay Pacific Airways Ltd.’s inspection of its Airbus SE A350 fleet is focused on deformed or degraded fuel lines in the engines of the widebody aircraft.
• Illumina Inc.’s abandoned $7 billion bid for cancer-detection provider Grail Inc. should never have been probed by the European Union, according to a top court ruling.
• Grifols has postponed its capital markets day until further notice in light of Brookfield’s potential takeover offer, according to a letter to investors seen by Bloomberg.

Key events this week: 

• US construction spending, ISM Manufacturing index, Tuesday
• Australia GDP, Wednesday
• China Caixin services PMI, Wednesday
• Euro-zone HCOB services PMI, PPI, Wednesday
• Fed’s Beige Book, Wednesday
• Eurozone retail sales, Thursday
• Germany factory orders, Thursday
• US initial jobless claims, ADP employment, ISM services index, Thursday
• Euro-zone GDP, Friday
• US nonfarm payrolls, Friday

Some of the main moves in markets: 

Stocks

• The Stoxx Europe 600 fell 0.2% as of 10:03 a.m. London time
• S&P 500 futures fell 0.3%
• Nasdaq 100 futures fell 0.4%
• Futures on the Dow Jones Industrial Average fell 0.3%
• The MSCI Asia Pacific Index was little changed
• The MSCI Emerging Markets Index fell 0.4%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro fell 0.2% to $1.1049
• The Japanese yen rose 0.7% to 145.83 per dollar
• The offshore yuan was little changed at 7.1222 per dollar
• The British pound fell 0.2% to $1.3123

Cryptocurrencies

• Bitcoin fell 0.3% to $58,826.55
• Ether fell 2.1% to $2,501.91

Bonds

• The yield on 10-year Treasuries was little changed at 3.91%
• Germany’s 10-year yield declined one basis point to 2.33%
• Britain’s 10-year yield declined one basis point to 4.04%

Commodities

• Brent crude fell 0.4% to $77.19 a barrel
• Spot gold rose 0.2% to $2,504.68 an ounce

This story was produced with the assistance of Bloomberg Automation.

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