Highlights:
- Markets expected the US to have added +170k jobs in August, but actor strike could drag
- The strike unlikely to have material impact on AHE, forecast at 0.3% M/M after July’s surprise strength
- China take further steps to support the economy, trimming the FX RRR
US TSYS: Curve Twists A Little Steeper Into NFPs
Tsys continue to coil ahead of NFPs & the ISM manufacturing survey, with TYZ3 last -0-03+, sticking to the narrow 0-04+ range established in Asia-Pac hours.
- Cash Tsys twist steepen at the margin, running 1bp richer to 1.5bp cheaper.
- Yields operate just off the lows of recent sessions and the curve pivoting at 10s.
- 2s10s and 5s30s within recent ranges, well off inverted cycle extremes.
- Final European & UK m’fing PMI data, along with the delivery of previously touted support surrounding the Chinese property & FX markets, has provided the bulk of the interest in pre-NY trade, although didn’t move Tsys.
- Comments from Atlanta Fed President Bostic haven’t been market moving.
- Note the BBG whisper number for the headline NFP release sits at +155K, a touch below the BBG survey median of +170K (range of survey +120K to +230K).
- Final U.S. manufacturing PMI data from S&P global and Fedspeak from Mester pads out the NY docket.
STIR FUTURES: Familiar Levels In Play In Fed Pricing Into NFPs
Little net movement in FOMC-dated OIS pre-NY, with terminal policy rate pricing continue to hold around the 5.45% mark, come November. Beyond there, ~50bp of cuts show through June ’24.
- Zooming out, the post-JOLTs downtick from recent hawkish extremes sets the market scene into NFPs.
- This morning’s Fedspeak from Bostic (’24 voter) wasn’t market moving, while comments from Cleveland Fed President Mester (’24 voter, hawk) are due later.
- Still, more focus rests on the impending tier 1 data, which comes in the form of the aforementioned NFP report and ISM manufacturing survey.
SOFR: OI Suggests Fresh Net Longs Dominated Positioning Swings On Thursday
The combination of yesterday’s modest gains on the SOFR strip and preliminary open interest data indicate that the addition of fresh longs dominated from a net positioning perspective on Thursday.
- The whites saw a modest uptick in OI on net, with apparent short cover in SFRZ3 offsetting the bulk of what seemed like net fresh long setting in the rest of the pack.
- Elsewhere, the reds and the greens seemingly saw longs added on net.
- Finally, short cover appeared to be the marginal dominant positioning factor in the blues.
| 31-Aug-23 | 30-Aug-23 | Daily OI Change | Daily OI Change In Packs | ||
| SFRM3 | 1,124,318 | 1,121,097 | +3,221 | Whites | +3,134 |
| SFRU3 | 1,089,326 | 1,074,804 | +14,522 | Reds | +39,406 |
| SFRZ3 | 1,271,323 | 1,292,004 | -20,681 | Greens | +16,372 |
| SFRH4 | 973,940 | 967,868 | +6,072 | Blues | -2,250 |
| SFRM4 | 849,697 | 843,121 | +6,576 | ||
| SFRU4 | 806,584 | 785,216 | +21,368 | ||
| SFRZ4 | 833,217 | 819,582 | +13,635 | ||
| SFRH5 | 527,949 | 530,122 | -2,173 | ||
| SFRM5 | 592,587 | 594,703 | -2,116 | ||
| SFRU5 | 492,567 | 494,065 | -1,498 | ||
| SFRZ5 | 436,042 | 418,584 | +17,458 | ||
| SFRH6 | 288,237 | 285,709 | +2,528 | ||
| SFRM6 | 227,504 | 226,129 | +1,375 | ||
| SFRU6 | 159,894 | 158,739 | +1,155 | ||
| SFRZ6 | 177,061 | 180,638 | -3,577 | ||
| SFRH7 | 124,393 | 125,596 | -1,203 |
Payrolls Seen Slowing to +170k
Two hours out from the August NFP release, MNI Preview here: https://roar-assets-auto.rbl.ms/files/55566/USNFPS...
- Consensus sees payrolls growth of 170k with perhaps a little under 20k as a temporary drag from the actors’ strike June, along with a potential seasonal bias lower.
- The strike is seen unlikely to have a material impact on AHE, forecast at 0.3% M/M after July’s surprise strength, or average hours worked, seen holding at pre-pandemic lows.
- It could help push the u/e rate higher though, with analysts skewed higher than consensus for no change.
FOREX: USD Has Pared Overnight Gains, NFP In Focus
The Dollar has pared of all its gains during the European morning session, after the Emini recovered from its lows, helping EU Equities also off their lows.
- The Dollar now leans in the red against G10, although AUD is still down just 0.14%.
- Some of the notable mover was the SEK in early trade initially falling, following a pretty poor Manufacturing PMI, but the currency has since faded the move to trade back at pre Swedish PMI levels.
- Most FX pair/Crosses trade within ranges, as investors await the US NFP/AHE.
- NOK is the best performer, albeit by just 0.17%, with the latter aided by the move higher in Oil this Morning, with WTI breaking above $84.
- Looking ahead, US NFP/AHE, and final Manufacturing PMI.
- Range for NFP is 120k/230k, Median 170k, whisper 155k.
- Speakers include, Fed Bostic (non voter, on Mon Pol), Mester (non voter, on Inflation).
EGBS: Core Curves Twist Steepen, ECB Speak, PMIs & ECB Forecasts Eyed Ahead Of NFPs
Late Thursday comments from ECB President de Guindos (September hike debate open, little change set to be made to updated inflation forecasts) were earmarked as a potential source of the modest pressure placed on EGBs early today, although curves moved steeper as opposed to flatter.
- A late NY downtick in U.S. Tsys will have also aided early the direction of travel.
- On the other side, slightly softer than flash readings in the final Eurozone manufacturing PMI data and Morgan Stanley calling time on the ECB rate hiking cycle limited the weakness (ECB-dated OIS now shows ~7bp of tightening for this month, with terminal deposit rate pricing hovering around 3.91%).
- Bund futures are -20, off lows, while the major German cash benchmarks sit 1bp richer to 2bp cheaper as the curve twist steepens.
- Most other core/semi-core curves also twist steepen, with spreads vs. Bunds little changed on the day.
- Peripherals have seen less generic moves.
- Matters offshore are set to dominate for the rest of the day, with the monthly U.S. NFP release and ISM manufacturing survey eyed.
GILTS: Off Lows, A Touch Cheaper On The Day, Looking Elsewhere For Cues
Gilt futures sit around the middle of a 35-tick session range, last showing -25, operating within yesterday’s boundaries.
- The major cash benchmarks print 1-2bp cheaper on the day, as the curve flattens at the margin.
- The space has looked elsewhere for direction at times.
- SONIA futures are +0.5 to -4.0 through the blues, twist steepening, but off session lows.
- BoE-dated OIS is little changed on the day,
- Final manufacturing PMI data saw an improvement on the flash reading at the headline level, but the index remains deep in contractionary territory.
- There was a larger than expected fall in the monthly Nationwide house price index, with worry surrounding the property space well-documented.
- There has also been some coverage of the increase in the usage of buy now pay later schemes to cover essential UK household costs such as grocery shopping, which isn’t a welcome finding.
- Comments from BoE’s Pill shouldn’t be too market moving later today, as he spoke yesterday, with more focus on the impending tier 1 U.S. data releases.
EQUITIES: S&P 500 E-Minis Testing Resistance At The Former Channel Base
Eurostoxx 50 futures remain closer to recent highs despite the latest pullback The contract has traded above resistance at the 50-day EMA at 4329.9. A continuation higher would signal scope for a climb towards resistance at 4420.00. The bull trigger is 4358.00, the Aug 30 high. On the downside, a breach of 4187.00, the Aug 18 low, would be a bearish development and confirm a resumption of the downtrend. The E-mini S&P contract maintains a firmer short-term tone. Price has traded above resistance at 4526.29, the base of a bull channel, drawn from the Mar 13 low that was breached on Aug 16. A clear break of this level would strengthen the upleg and open 4560.75, the Aug 4 high. Initial support to watch lies at 4455.40, the 50-day EMA. A return below the average would be a bearish development.
COMMODITIES: Gold Correction Remains In Play
The uptrend in WTI futures remains intact and yesterday’s gains reinforce this theme. Price is approaching key resistance at $84.16, the Aug 10 high. A clear break would be bullish and confirm a resumption of the uptrend. This would open $85.24, a Fibonacci projection. On the downside, initial support to watch is $80.43, the 20-day EMA. A break would signal a short-term top and expose the 50-day EMA at $78.18. A short-term correction in Gold remains in play and the yellow metal has breached resistance at the 50-day EMA - at $1931.5. This strengthens the current bull cycle and signals scope for a stronger recovery. Attention turns to $1948.3, 61.8% of the Jul 20 - Aug 21 bear leg. It has been pierced, a clear break would open $1963.3, the 76.4% retracement. On the downside, initial firm support lies at $1903.9, the Aug 25 low.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Flag | Country | Event |
| 01/09/2023 | - | *** |  | US | Domestic-Made Vehicle Sales |
| 01/09/2023 | 1230/0830 | *** | | US | Employment Report |
| 01/09/2023 | 1230/0830 | *** |  | CA | Gross Domestic Product by Industry |
| 01/09/2023 | 1345/0945 | | US | Cleveland Fed's Loretta Mester | |
| 01/09/2023 | 1345/0945 | *** | | US | IHS Markit Manufacturing Index (final) |
| 01/09/2023 | 1400/1000 | *** | | US | ISM Manufacturing Index |
| 01/09/2023 | 1400/1000 | * | | US | Construction Spending |