Growth in private sector employment slowed last month, increasing by 177,000 jobs in August, while annual pay advanced by 5.9 percent year-over-year. The ADP National Employment Report is based on anonymized payroll data of more than 25 million U.S. employees.

"This month's numbers are consistent with the pace of job creation before the pandemic," said Nela Richardson, chief economist, ADP. "After two years of exceptional gains tied to the recovery, we're moving toward more sustainable growth in pay and employment as the economic effects of the pandemic recede."

Job creation by hotels, restaurants and other employers in the sector fell to 30,000 in August after months of strong hiring.

Since the start of the week, risk appetite is back on markets, where Chinese efforts to revive the economy and easing pressure on the Fed are boosting sentiment, gradually erasing the losses recorded at the beginning of the month. US macroeconomic data expected between Wednesday and Friday will act as referees.

Risk appetite is especially prevalent among investors convinced that the US central bank is done with rate hikes. In recent weeks, these staunch optimists had been forced to keep a low profile in the face of fears of persistent inflation fueled by an overly resilient US economy. But yesterday, they were visibly boosted by bad macroeconomic statistics, just like this morning so far. Yes, it's been a while since we've talked about the underlying mechanism driving the markets and boosting highly leveraged equities.

The basic reasoning is that markets rise more easily when liquidity is abundant. But for liquidity to be abundant, money has to be cheap. This means low key interest rates, which investors love. But when money is too cheap, inflation is never far away. So central banks have to raise rates to calm overheating and imbalances, and investors don't like that. As a result, they become infatuated with weak macroeconomic statistics. However, there are exceptions to this rule: investors only love bad data when it occurs in a context where they can force central banks to loosen monetary policy. The rest of the time, robust statistics, neither too exuberant nor too catastrophic, are welcome.

Yesterday’s mediocre job opening figures for August and a contraction in consumer confidence led investors to believe that the Fed will have less reason to resume its rate hike path, as additional signs of a slowdown in activity materialized. Today’s job data sorts of confirms this. In fact, after the release of the indicators, the expected reactions occurred: the yield on US 10-year debt fell back below 4.1%, and the options show a decline in rate hike forecasts this year, as well as a slight advance in the time when rates could start falling again: June 2024 instead of July 2024.

All these little gears in motion resulted in a 2.15% rise in the Nasdaq 100 yesterday, while the S&P 500 gained 1.45%. Earlier in the day, Europe also posted its third consecutive session in the green.

Meanwhile, China continues to multiply small signs of support for certain fragile parts of its economy. Apparently, the real estate sector is about to receive another boost. An insistent rumor is circulating that several Chinese state-owned banks will soon reduce the rates applied to existing property loans.

Economic highlights of the day:

The first estimate of German inflation, the ADP employment survey and the latest estimate of Q2 GDP and wholesale inventories, as well as Pending Home Sales. The full agenda is here. 

The dollar is down to EUR 0.9157 and GBP 0.7866. The ounce of gold is up to USD 1944. Oil resumed its ascent, with North Sea Brent at USD 85.10 a barrel and US light crude WTI at USD 81.45. The yield on 10-year US debt fell to 4.14%. Bitcoin is trading at around USD 27,400.

In corporate news:

  • Hewlett Packard Enterprise - The server manufacturer fell by 1.43% after the close, after announcing that it expected sales of between $7.2 and $7.5 billion for the current quarter, with a median below analysts' expectations of $7.49 billion.
  • HP Inc fell by 9% in pre-market trading after the PC manufacturer reduced its outlook for the fiscal year. The company expects earnings of between $3.23 and $3.35 per share, compared with $3.30 to $3.50 previously.
  • Major U.S. regional banks are expected to issue around $70 billion in new debt under a rule proposed Tuesday by U.S. banking regulators, aimed at bolstering the sector's resilience.
  • Tesla is down 1.4% in pre-market trading, after gaining over 11% in the last three sessions.
  • Box - The cloud computing company is down 9.8% after the close, as it forecasts third-quarter sales of $261 million to $263 million, compared with the $265.6 million average forecast by analysts.
  • PVH Corp rises by 1.5% after the close. Tommy Hilfiger's parent company is forecasting earnings of $10.35 per share for the fiscal year, compared with $10 previously, while analysts were expecting $10.02.
  • Mosaic is down 1.7% in pre-market trading following the announcement of the departure of its CEO James O'Rourke.
  • Fibrogen falls 14% after the close, as the drug developer reports that its experimental drug for Duchenne muscular dystrophy has failed to meet targets in a late-stage study.
  • Rite Aid fell by 6.3% before the opening, S&P Global having downgraded the company due to restructuring risks.
  • Ambarella - The chipmaker fell by nearly 20% before the stock market after reporting third-quarter sales of $50 million, well below Wall Street estimates of $67.6 million. TD Cowen downgrades its recommendation from "outperform" to "in-line performance".

Analyst recommendations:

  • Align Technology: HSBC initiated coverage with a recommendation of buy. PT set to $450.
  • Centene: Morgan Stanley downgrades to equal-weight from overweight. PT up 13% to $73.
  • Cognex: Citi initiated coverage with a recommendation of neutral. PT set to $52.
  • Drax group plc (drx ln): Liberum maintains its buy recommendation with a price target reduced from 940 to 900 GBp.
  • Glencore plc (glen ln): BNP Paribas Exane maintains its Outperform recommendation with a price target raised from GBp 550 to GBp 557.
  • Highwoods: Wells Fargo Securities downgrades to equal-weight from overweight. PT down 8.3% to $22.
  • Hikma pharmaceut: Citi maintains its Buy recommendation with a price target raised from 22.10 to 24.80 GBP.
  • John wood group: Citi maintains its neutral recommendation with a price target raised from 1.60 to 1.70 GBP.
  • Petrofac ltd (pfc ln): Kepler Cheuvreux maintains its downward recommendation, with a new target price of GBP 35, compared with GBP 40 previously
  • Rockwell Automation: Barclays downgrades to underweight from equal-weight. PT set to $287, implies a 9.5% decrease from last price.
  • Sage group: Numis maintains its Buy recommendation, with a price target raised from GBp 1000 to GBp 1150.