Morning Bid Americas: Jobs and oil dominate as ports strike ends

Apogee Enterprises

04/10/2024 11:00

A look at the day ahead in U.S. and global markets from Mike
Dolan
Wall Street has weathered an edgy start to the final quarter
reasonably well this week, with the September employment report
now an obvious final hurdle on Friday and firmer oil prices an
irritant even as a three-day U.S. ports strike ends.
    As has been the case for weeks, markets are trying to find
the balance between signs of persistent growth but at a pace
soft enough to sustain disinflation and Federal Reserve interest
rate cut hopes.
    Labor market soundings so far this week certainly support
the former, though brisk job growth and the relatively modest
oil price pop on Middle East tensions raised some questions over
Fed easing speculation.
    At least the threat that this week's ports strike may feed
retail price rises looks to have been averted. U.S. East Coast
and Gulf Coast ports began reopening late on Thursday after
dockworkers and port operators reached a wage deal to settle the
industry's biggest work stoppage in nearly half a century.
    As Chicago Fed boss Austan Goolsbee pointed out on Thursday,
 retailers and manufacturers had stockpiled about two weeks
worth of items in anticipation of the strike and that should be
sufficient now the dispute has ended.
    This week's crude oil price rise, aggravated by comments
from U.S. President Joe Biden on Thursday that Israeli
retaliation against Iran's rocket attack could target Tehran's
oil facilities, has become a more unpredictable prospect as
nerves about weekend events may keep traders on tenterhooks.
    Still, despite this week's jump in crude prices  CLc1 , oil
prices are only back to where they were a month ago and continue
to track annual declines of more than 10%. U.S. retail gasoline
prices remain close to eight-month lows.
    And so the scene is set for the September payrolls report
later on Friday, with consensus forecasts for another 140,000
new jobs last month - close to August's tally - and an
unemployment rate steady at 4.2%.
    Most of the week's labor updates - private sector payrolls,
jobless claims, vacancies and layoffs data - show the jobs
market remains in relatively rude health.
    So for all the cross-currents this week, the S&P500  .SPX 
has lost little more than 0.5% so far and futures are higher
into Friday's open. Implied volatility captured by the VIX index
 .VIX , however, remains elevated at about 20.
    The shifting rates picture and background geopolitics is
trickier for Treasuries, where 10-year yields  US10YT=RR  have
pushed up a net 5 basis points this week to 3.85% - but held
close to Thursday's close overnight.
    Fed futures pricing, with just 66bp of rate cuts now
pencilled in by yearend, is leaning towards two further
quarter-point Fed rate cuts this year rather than one of those
being another 50bp move.
    The dollar  .DXY  has been the big winner all week, not
least as central banks around the world turned more dovish on
their interest rate signalling just as Fed expectations ebbed.
    But the greenback retreated slightly on Friday, partly as
sterling  GBP=  clawed back some of the heavy losses suffered
when Bank of England governor Andrew Bailey talked on Thursday
of more "activist" and "aggressive" BoE easing. 
    Bailey's comments were dampened on Friday by his chief
economist Huw Pill, who said "it will be important to guard
against the risk of cutting rates either too far or too fast."
    Stock markets around the world  .MIWD00000PUS  were
marginally higher on Friday, with Hong Kong's Hang Seng index
 .HSI  resuming its recent steep climb on Chinese stimulus plans
after a stumble on Thursday. The offshore yuan  CNH=  weakened.
    In Europe, attention was focussed on European Union trade
negotiations that struggled to find a consensus on raising
tariffs of up to 45% on Chinese electric vehicle imports - with
Europe's auto sector suffering multiple hits from the rivalry
and dragging on region's industrial economy.
    With Germany voting against the tariffs because of fears of
Chinese retaliation against German carmakers, EU countries
failed to vote clearly in favour or against, leaving the
European Commission to decide, EU sources told Reuters on
Friday.
    In a later statement, the Commission said the proposal to
impose definitive tariffs has obtained the necessary support -
but it would continue negotiations with China "to explore an
alternative solution that would have to be fully
WTO-compatible."
    European auto shares  .SXAP , which had been the worst
performing sector this week with losses of almost 7% due to the
tariff standoff and mounting profit warnings, jumped back almost
1% on Friday after the reports.
    Elsewhere, the latest data on U.S. money market funds showed
assets under management jumped again in the latest week to a new
record of $6.46 trillion - puzzling some who had expected money
to exit these cash-like funds as Fed rate cuts got underway.
      
Key developments that should provide more direction to U.S.
markets later on Friday:
* US September employment report; Mexico August jobless rate 
* New York Federal Reserve President John Williams speaks
* US corporate earnings: Apogee Enterprises



    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
U.S. hiring has narrowed to fewer industries    https://reut.rs/3NcTcxc
Jobless claims and Challenger Gray    https://reut.rs/4eqjY0X
Cargo ships stuck outside US ports as of Oct 3    https://reut.rs/3ZQ4ZZD
Iranian oil infrastructure    https://reut.rs/3ZN17sk
Fund flows: U.S. equity sector funds    https://tmsnrt.rs/40SDRqx
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (By Mike Dolan, editing by Mark Heinrich
mike.dolan@thomsonreuters.com)
 ((mike.dolan@thomsonreuters.com  https://reut.rs/3xFdLhlhomsonreuters.com
 mailto:mike.dolan@thomsonreuters.com; +44 207 542 8488; Reuters
Messaging: rm://mike.dolan.reuters.com@thomsonreuters.net/))