- ADP August employment +99K vs +145K expected
- US August ISM services 51.5 vs 51.1 expected
- US August final S&P Global Services PMI Aug 55.7 vs 55.2 prelim
- US initial jobless claims 227K vs 230K estimate
- US Q2 unit labor costs +0.4% vs +0.8% expected
- OPEC+ agrees to delay October oil output increase - report
- GOP nominee Trump to propose a 15% tax rate for companies that manufacture goods in the US
- Treasury Secretary Yellen: US labor market has become less tight. Still creating jobs.
- Canada Q2 labour productivity -0.2% vs -0.3% prior
- Canada August S&P Global Services PMI Aug 47.8 vs 47.3 prior
Markets:
- Gold up $21 to $2515
- US 10-year yields down 4 bps to 3.73%
- WTI crude oil down 2-cents to $69.17
- S&P 500 down 0.3%
- NZD leads, USD lags
The usual angst crept into markets ahead of non-farm payrolls and it led to some back-and-forth swings with no real direction. The early move was US dollar weakness on the soft ADP report but it reversed later when the services PMIs offered a reminder that big parts of the economy are still fine.
The mixed messages from those and other economic data points have the market feeling off balance. Mix in the usual variance in non-farm payrolls and Friday is set up for some big swings.
On net, the dollar softened on Thursday as yields fell to the lows of the year. The signal from bonds has been persistent and hard to ignore as we've gone from disinflation to flight-to-safety levels of yields. There is some sense that it's overshot but also a fear that the bond market knows something that other markets haven't caught up with.
Mechanically, the falling yields are weighing on the US dollar and USD/JPY lost another 30 pips today. The pair earlier looked like it could break down as it crossed 143.00 but the sellers weren't willing to push the move ahead of NFP and it bounced back to 143.45 late.
Adding to the low-inflation trade at the moment is oil, which got a lifeline on virtual confirmation that the OPEC ramp up will be pushed back to December. Unfortunately, the $2 bounce in oil fell flat in an ominous sign for crude but a good one for bond bulls and the Fed.
