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MNI US MARKETS ANALYSIS - JOLTS Next Pre-NFP Hurdle

Highlights:

  • JOLTS jobs data to provide some insight prior to Friday's NFP
  • Fed pricing inches back toward post-Powell dovish levels
  • Scandi currencies hampered by fragile market backdrop

US TSYS: Firmer Again, Labor Clues Keenly Watched

  • Treasuries have pulled back a little away from highs but the general theme is one of a further but milder rally after yesterday’s sizable risk-off moves. The S&P 500 e-mini has tilted a little lower (-0.4%) after -2.1% for cash yesterday and industrial metals remain under pressure.  
  • TYZ4 trades at 114-06 (+ 06) off an earlier high of 114-09, which pushed through yesterday’s 114-07+ in a latest step closer to resistance at 114-19+ (Aug 21 high). Volumes are elevated at 370k.
  • Cash yields are 1-2.5bps lower, with the front-end leading declines today after lagging moves yesterday.
  • The bull steepening sees 2s10s lift to -1.9bps (+1.1bp) as it remains close to Friday’s latest high of +0.5bp and the +2bp seen briefly in global risk-off spillover the Monday after last month’s payrolls.
  • Ahead, the BoC is expected to cut 25bp for a third consecutive meeting at 0945ET (but with less scope for spillover being fully priced) before firmer focus on JOLTS shortly after and less so the Beige Book for any signs of additional labor market weakness.
  • Data: Weekly MBA mortgages (0700ET), Trade balance Jul (0830ET), JOLTS Jul (1000ET), Factory orders Jul (1000ET)  
  • Fed: Beige Book (1400ET)
  • Bill issuance: US Tsy to sell $60bn 17-week bills (1130ET)

STIR: Fed Rates Moving Closer To Post Dovish Powell Levels

  • Fed Funds implied rates have extended yesterday’s decline overnight, with WTI (-0.6%) broadly stabilizing relative to heavy losses yesterday but industrial metals falling further (copper -2.5%, iron ore -2.1%).
  • It sees the Dec’24 rate some 2bps lower which leaves 105bp of cuts over the next three meetings, close to the 106bp seen in subsequent reaction to Powell’s dovish Jackson Hole speech.
  • Cumulative cuts from 5.33% effective: 35.3bp Sep, 70bp Nov, 105bp Dec, 134bp Jan and 197bp June.
  • The next scheduled Fedspeak is still only Williams and Waller in post-payrolls appearances on Friday, although today’s Beige Book offers some commentary in the interim.
  • Recent Beige Books have increasingly noted price sensitivity by consumers but expect greatest focus on labor market comments this time. The Jul 17 report gave an impression of further rebalancing rather than anything more abrupt: “Most Districts reported employment was flat or up slightly, while a few Districts reported modest employment growth. Several Districts reported declines in employment in the manufacturing sector due to slowdowns in new orders. Skilled-worker availability remained a challenge across all Districts; however, several Districts reported some improvement in labor supply conditions. Additionally, labor turnover was lower, which reduced demand to find new workers. Looking ahead, contacts in several Districts expect to be more selective on who they hire and not backfill all open positions.”

STIR: OI Points To Mix Of Long Setting & Short Cover During Tuesday's SOFR Rally

OI data points to a mix of net long setting and short cover during yesterday’s rally in SOFR futures.

  • Lower oil prices, equity market weakness and data-driven worry surrounding the U.S. economy drove the rally in core global FI markets.
  • Fed Funds futures now price ~35bp of cuts for the Sep FOMC & ~104bp of easing through year end vs. ~33bp & ~100bp late Friday.
 03-Sep-2430-Aug-24Daily OI Change Daily OI Change In Packs
SFRM41,140,5571,149,129-8,572Whites+36,842
SFRU41,351,4111,358,942-7,531Reds-5,838
SFRZ41,256,4261,208,518+47,908Greens-33,290
SFRH5911,680906,643+5,037Blues-491
SFRM5881,416882,002-586  
SFRU5660,602667,786-7,184  
SFRZ5931,461912,491+18,970  
SFRH6640,207657,245-17,038  
SFRM6641,613668,908-27,295  
SFRU6538,030547,356-9,326  
SFRZ6482,087485,405-3,318  
SFRH7304,252297,603+6,649  
SFRM7290,910293,047-2,137  
SFRU7229,579228,898+681  
SFRZ7237,011235,682+1,329  
SFRH8166,548166,912-364  

UKRAINE: Western Lviv Hit In Deadly Attack As Foreign Min Departs In Reshuffle

According to regional officials, at least three have been killed, 30 injured and buildings destroyed in the historic centre of the western city of Lviv in a Russian missile barrage that also hit the capital, Kyiv. For broad swathes of the war, Lviv, just 70km from the Polish border, has not been subjected to significant aerial attacks. However, it now appears to be another city in Russia's sights as the Kremlin steps up its campaign of deliberately targeting civilians as well as key infrastructure. The strike on Lviv comes a day after thedeadliest single attack of 2024, when more than 50 were killed when missiles hit a military institute in the central Ukrainian town of Poltava.

  • The escalation in Russian attacks on targets in Ukraine comes as Kyiv's forces continue their incursion in the Kursk oblast of the Russian Federation.
  • In an effort to provide some impetus to the situation, President Volodymyr Zelenskyy is engaging in a cabinet reshuffle. The most notable change is that of the foreign minister, Dmytro Kuleba, who has handed his resignationto the speaker of the Rada.
  • Rikard Jozwiak at RFE/RL posts on X: "Hear quite some worry in Brussels about the latest Ukrainian government resignations. While EU is quite used to plenty of personnel changes in Kyiv, many of the ministers were well-regarded, notably FM Dmytro Kuleba."
  • Speculation emerged late on 3 Sep of Kuleba's dismissal. The same report claims that PM Denys Shmyhal will remain in place.

FRANCE: Talks Continue, But Still No Sign Of Compromise To Get New PM

President Emmanuel Macron and the main political forces in the National Assembly show little sign of extricating themselves from France's political quagmire. Speculation over the weekend that an announcement on the identity of a new prime minister could come on 3 September swiftly turned sour as it became clear that - as yet - neither of the two most prominent candidates for office had enough support to avoid an immediate censure vote in the chamber.

  • Former centre-left Socialist Party (PS) PM Bernard Cazeneuve and President of the Hauts-de-France region Xavier Bertrand, from the centre-right Les Republicains, remain the two frontrunners, but both face obstacles.
  • Cazeneuve left the PS during the parliamentary election campaign, opposing the party's alliance with Jean-Luc Melenchon's far-left La France Insoumise (LFI) as part of the leftist New Popular Front (NFP). On the evening of 3 Sep, the party ruled out 'unconditional support' for any Cazeneuve-led gov't.
  • For Bertrand, the path to Matignon (the PM's residence) is even slimmer. The far-right Rassemblement National (RN) has said that it will vote against Bertrand in any censure vote. Spox Sebastien Chen said of Bertrand "...we know his record, we know his actions (...) . He is someone who, in reality, has no backbone... He is someone who works for himself (...)." The NFP will also vote against him, instead continuing to back their own candidate Lucie Castets. Both of these blocs voting against Bertrand would see him lose a censure vote.

Scandi Currencies Suffer as Cross-Market Sentiment Remains Shaky

  • Fragile market sentiment evident in the lack of any recovery bounce for stocks is keeping currency markets contained, with growth and high beta proxies still trading poorly. Scandi currencies in particular are weaker this morning, with SEK and NOK softer against all others in G10. USD/SEK trades higher for the fifth session in six, while USD/NOK is testing resistance at the confluence of the 100- and 50-dmas at 10.7362-68.
  • As a result of the shakier cross-market sentiment, haven currencies are firmer once again, helping the JPY and CHF higher. The trade-weighted JPY index holds close to recent highs, and a further 1.5% gain would put the currency at its strongest since the intervention-inspired bounce off the July low.
  • The greenback is more mixed, with softer PMI data from both Spain and Italy doing little to trigger conviction in either direction. EUR/USD is firmer above 1.1050, but yesterday's highs remain out of reach for now.  
  • Trade balance data from across the US and Canada is set to start the NA session, but it's the JOLTS Job Openings data that could prove more of a needle mover, given the Fed's acute sensitivity to labour market conditions headed into the September decision.
  • The Bank of Canada rate decision is expected to see a third consecutive 25bps rate cut, putting the overnight lending rate at 4.25% today. The press conference with governor and deputy governor Macklem and Rogers to be carefully watched for any details on the pace of easing ahead.

Expiries for Sep04 NY cut 1000ET (Source DTCC)

  • EUR/USD: $1.0950(E894mln), $1.1000-20(E1.1bln), $1.1125-30(E597mln), $1.1190-00(E1.2bln)
  • USD/JPY: Y145.00($927mln), Y146.25-35($1.3bln)
  • EUR/JPY: Y164.00(E826mln)
  • AUD/USD: $0.6740(A$620mln)
  • USD/CAD: C$1.3515($1.1bln), C$1.3700($506mln)

E-Mini S&P Breaks Below 20- and 50-Day EMAs

  • Eurostoxx 50 futures have reversed course and this has resulted in a break of both the 20- and 50-day EMAs. The move lower highlights the start of a corrective cycle, paving the way for a pullback towards 4805.47 initially, a Fibonacci retracement. Initial firm short-term resistance has been defined at 4998.00, the Sep 3 high. A break of this level would reinstate the recent bullish theme.
  • A bullish theme S&P E-Minis remains intact, however yesterday’s sharp sell-off signals the start of a corrective cycle. Price has traded through the 20-day EMA and pierced support at the 50-day average, at 5519.81. A clear break of the 50-day EMA would signal scope for a deeper retracement towards 5459.75, a Fibonacci retracement. Key near-term resistance has been defined at 5669.75, the Sep 3 high. A breach of it would be bullish.

WTI Futures Trading at Lowest Level Since December 2023

  • WTI futures maintain a softer tone. The contract traded sharply lower Tuesday, resulting in a break of key support at $70.88, the Aug 5 low. The clear break of this level confirms a resumption of the downtrend that started Apr 12 and paves the way for an extension towards $68.92, the Dec 13 ‘23 low. Moving average studies are in a bear-mode position highlighting a clear downtrend. Initial resistance is at $74.65, the 20-day EMA.
  • The trend in Gold remains bullish and the recent sideways move marks a pause in the uptrend. MA studies are in a bull-mode set-up and this highlights a dominant uptrend. The recent breach of $2483.7, Jul 17 high, confirmed a resumption of the primary uptrend and the focus is on $2536.4 next, a Fibonacci projection. Initial support to watch lies at $2483.6, the 20-day EMA. It has been pierced, a move lower would  be considered corrective.

MNI (LONDON)

DateGMT/LocalImpactCountryEvent
04/09/20240130/1130***au AUQuarterly GDP
04/09/20240700/0900 eu EUECB's Elderson at Joint European Banking Authority and ECB conference
04/09/20240900/1100**eu EUPPI
04/09/20241100/0700**us USMBA Weekly Applications Index
04/09/2024-***us USDomestic-Made Vehicle Sales
04/09/20241230/0830**us USTrade Balance
04/09/20241230/0830**ca CAInternational Merchandise Trade (Trade Balance)
04/09/20241255/0855**us USRedbook Retail Sales Index
04/09/20241345/0945***ca CABank of Canada Policy Decision
04/09/20241400/1000**us USFactory New Orders
04/09/20241400/1000***us USJOLTS jobs opening level
04/09/20241400/1000***us USJOLTS quits Rate
04/09/20241400/1000 us USMNI Connect Video Conference on the U.S. Fiscal Policy Outlook
04/09/20241430/1030 ca CABOC Governor Press Conference
04/09/20241800/1400 us USFed Beige Book
05/09/20240130/1130**au AUTrade Balance
05/09/20240545/0745**ch CHUnemployment
05/09/20240600/0800**de DEManufacturing Orders
05/09/20240730/0930**eu EUS&P Global Final Eurozone Construction PMI
05/09/20240830/0930**gb GBS&P Global/CIPS Construction PMI
05/09/20240830/0930 gb GBBOE DMP Data
05/09/20240900/1100**eu EURetail Sales
05/09/20240900/1000**gb GBGilt Outright Auction Result
05/09/20241215/0815***us USADP Employment Report
05/09/20241230/0830***us USJobless Claims
05/09/20241230/0830**us USNon-Farm Productivity (f)
05/09/20241400/1000***us USISM Non-Manufacturing Index
05/09/20241430/1030**us USNatural Gas Stocks
05/09/20241500/1100**us USDOE Weekly Crude Oil Stocks
05/09/20241530/1130**us USUS Bill 04 Week Treasury Auction Result
05/09/20241530/1130*us USUS Bill 08 Week Treasury Auction Result
06/09/20240130/1130**au AULending Finance Details
06/09/20240600/0800**de DETrade Balance
06/09/20240600/0800**de DEIndustrial Production
06/09/20240645/0845*fr FRIndustrial Production
06/09/20240645/0845*fr FRForeign Trade
06/09/20240700/0900 eu EUECB's Elderson speech at ESCB Conference
06/09/20240900/1100***eu EUGDP (final)
06/09/20240900/1100*eu EUEmployment
06/09/20240900/1100*it ITRetail Sales
06/09/20241230/0830***us USEmployment Report
06/09/20241230/0830***ca CALabour Force Survey
06/09/20241230/0830**us USWASDE Weekly Import/Export
06/09/20241245/0845 us USNew York Fed's John Williams
06/09/20241400/1000*ca CAIvey PMI
06/09/20241500/1100 us USFed Governor Christopher Waller
06/09/20241700/1300**us USBaker Hughes Rig Count Overview - Weekly
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