August Payrolls Loom: Futures Flat, Dollar Rises, Treasuries Slip
New York (Sept 2) The much anticipated payrolls day, expected to provide at least some more clarity on future Fed policy, has arrived and heading into today's report both price action and newsflow has been muted. U.S. equity index futures were fractionally higher, as European stocks rise 0.6% while Asia was flat. Gold fell as the dollar rose, while comments by Vladimir Putin which endorsed an OPEC oil production freeze while granting Iran an exemption, have pushed oil higher.
Federal Reserve Vice Chairman Stanley Fischer said this week that upcoming economic reports would determine the trajectory of interest-rate increases, having previously highlighted Friday’s payrolls update as being of importance. Odds of a rate increase at the Fed’s September meeting have swung between 34 percent and 36 percent this week amid conflicting data showing an improving jobs market and an unexpected contraction in manufacturing.
"Investors are on tenterhooks ahead of today’s U.S. employment report following a host of hawkish Fed comments,” Nick Stamenkovic, a strategist at RIA Capital Markets in Edinburgh told Bloomberg. “The front-end is vulnerable to an upside surprise in payrolls and that explained a pick-up in yields ahead of the data.”
Treasuries fell and the dollar advanced in the countdown to a key U.S. jobs report that’s seen shaping expectations for the timing of the next interest-rate increase. Yields on 10-year Treasuries climbed to the highest level this week with the yield on the 10Y rising three basis points to 1.59%, leaving them down three basis points this week. The two-year yield increased by one basis point to 0.79 percent. It’s still down five basis points for the week.
US yields were not the only ones to rise. Japanese 10Y government bonds declined amid uncertainty over whether the Bank of Japan will tweak its debt-buying program this month and concern over demand at upcoming auctions. The 10-year yield touched minus 0.02 percent, the highest since March.
“[Japanese] yields are rising on wariness that the BOJ might reduce purchases in the super-long sectors when it meets this month,”said Souichi Takeyama, a strategist at SMBC Nikko in Tokyo. “Rising volatility is also raising concerns about demand at a slew of auctions this month.”
The Stoxx Europe 600 Index added 0.6%. Equities have struggled to maintain momentum in recent weeks, and a Bank of America report showed investors pulled cash from funds tracking the region’s equities for a 30th straight week. Rocket Internet SE slid 7.5 percent after the German startup investor announced a first-half loss. SBM Offshore tumbled 13 percent after a Brazilian prosecutor failed to ratify a leniency agreement related to a bribery case concerning Petroleo Brasileiro SA. Adidas AG lost 1.3 percent after Callaway Golf Co.’s chief executive officer said it will not bid for the German company’s golf division. Futures on the S&P 500 Index were little changed after equities ended Thursday little changed.
The Bloomberg Dollar Spot Index extended a second weekly gain. European
stocks advanced as volatility hovered near a one-year low. Crude pared
its biggest weekly drop since January, while gold traded close to the
lowest since June.
Crude oil rose 0.5 percent to $43.36 a barrel in New York, after tumbling 9.4 percent over the last four days. U.S. inventories increased last week, keeping supplies at the highest seasonal level in at least three decades, official data showed Wednesday. OPEC members plan to meet this month in Algiers to discuss action to stabilize the market and Saudi Arabia has said a cap on production would be positive. Russian President Vladimir Putin said he’s confident such a deal will be agreed.
Source: ZeroHedge
