North American Morning Briefing: Stock Futures Edge Up Ahead of Jobs Report

09/03/2021 | 06:09am


Watch For:

U.S. Employment Report for August; U.S. ISM Report on Business Services PMI for August.

Opening Call:

Stock futures edged higher ahead of the August employment report, which will indicate the strength of the labor market recovery.

The fresh jobs figures, due at 8:30 a.m. ET, could influence the Federal Reserve's timetable for scaling back stimulus policies that have supported markets during the pandemic. A recent uptick in Delta variant Covid-19 infections has caused some investors to expect that the U.S. economic recovery may pause and cause the Fed to slow the reduction of easy-money policies.

"For now, the binding constraint of what they do is the labor market. That payroll is really the thing to watch in seeing how quickly we get through that labor market slack and approach actual rate hikes," said Hani Redha, a portfolio manager at PineBridge Investments.

Economists surveyed by The Wall Street Journal estimate that the U.S. economy added 720,000 jobs in August and that the unemployment rate fell to 5.2%.

Fresh figures on activity in the U.S. services sector for August are also due. Private data firm IHS Markit will release results from its survey of purchasing managers in the U.S. services sector at 9:45 a.m., and the Institute for Supply Management will release its services index at 10 a.m.

Overseas, the Stoxx Europe 600 index edged lower. Shares of emerging-markets asset management firm Ashmore Group fell 4.6% in London trading after it posted full-year results that showed net revenues were down.

In Asia, Japan's Nikkei 225 jumped almost 2.1% after Japanese Prime Minister Yoshihide Suga said he wouldn't seek re-election as ruling-party leader.

Investors cheered comments from potential successors who proposed big economic-stimulus programs to lift Japan out of sluggishness caused by repeated Covid-19 waves.

Other Asian indexes closed with mixed performance. China's Shanghai Composite and Hong Kong's Hang Seng both fell. Alibaba Group Holding shares fell 3.5% in Hong Kong after the company vowed to spend the equivalent of $15.5 billion fostering social equality.


The dollar traded flat as investors turn cautious before the release later Friday of the U.S. nonfarm payrolls report for August, which could influence the Federal Reserve's decision on when it will start tapering asset purchases.

The market seems to have already priced in a slowdown in jobs growth in August, Unicredit analysts say. "Nonetheless, a lower number (we expect a 700,000 reading) may still drag the USD down further after the DXY index moved back below the August lows at around 92.50."

That could see EUR/USD rise above the key 1.19 level and GBP/USD rally further beyond 1.38, the analysts said.

Speculation that the European Central Bank could scale back its pandemic bond purchases at Thursday's meeting might support the euro ahead of the event, ING said.

"Assuming the U.S. nonfarm payrolls report is not too strong today, we favor EUR/USD nudging up to resistance at 1.1900--but that might prove a tough nut to crack," ING analysts said.


In bond markets, the yield on the 10-year Treasury note ticked up to 1.295% from 1.293% Thursday.

The ECB's communication at Thursday's meeting will aim to avoid misinterpreting an anticipated reduction in the Pandemic Emergency Purchase Programme as tapering, said Barclays' analyst Silvia Ardagna.

Barclays expects the ECB to announce a reduction in PEPP purchases for the fourth quarter due to an improved macroeconomic backdrop, along with an upgrade to growth and inflation forecasts, she said.

Barclays expects an announcement on the size of the regular Asset Purchase Programme for the post-PEPP era to come later in the fourth quarter, Ardagna said.

"We expect the ECB President will signal that the APP programme could be recalibrated if the PEPP ends in March 2022 and that, if needed, PEPP could also be extended beyond that date," she said.


Oil wavered around flat after the unexpectedly severe impact of Hurricane Ida prompted traders to buy, DNB Markets' Helge Andre Martinsen said.

With 1.7 million barrels a day of production capacity remaining offline on Thursday, "the crude oil inventory build caused by the hurricane could thus turn out to be more moderate than anticipated," Commerzbank's Carsten Fritsch said.

Investors have sold holdings in gold exchange-traded funds in the build-up to the U.S. jobs report due later.

Gold ETFs tracked by FactSet had outflows of approximately $185 million between Monday and Thursday, according to the data provider.

"ETF investors remain on the sidelines in the run-up to this important data publication and sold shares once again yesterday," said Daniel Briesemann at Commerzbank.

FactSet's data shows gold ETFs saw just one day of net positive inflows in July and August, but 19 days of net outflows. Gold price movements have been lackluster in recent weeks.


Chip Shortage Curtails Heavy-Duty Truck Production

The semiconductor shortage is short-circuiting heavy-duty truck production as supply-chain disruptions hamper efforts to meet robust demand for new big rigs.

North American production of Class 8 trucks, the big vehicles that haul most domestic freight, sank this summer to its lowest level since May 2020, when the coronavirus had shut down much of the U.S. economy. Equipment makers built 14,920 units in July, the most recent month for which figures were available, while the backlog of trucks ordered but not built nearly tripled from the same month a year ago, to 262,100, according to transportation data provider ACT Research.


Car Buyers Face Bleak Prospects This Labor Day Weekend

The U.S. auto industry is heading into one of its biggest selling weekends of the year with dealership lots stripped bare of inventory and some buyers having to drive great distances to secure a new ride.

For a second year in a row, car shoppers are facing bleak prospects in trying to buy a car this Labor Day weekend. The period has historically been a time of blowout deals and big sales events for car companies and dealerships trying to clear out old vehicle stock to make way for the new model year.


SMIC Plans Wafer Production JV With Total Investment of $8.87 Billion

Semiconductor Manufacturing International Corp. plans to create a joint venture company to produce wafers in a Shanghai free trade zone that will entail a total investment of $8.87 billion.

China's leading chip maker said Friday that the planned joint venture, with Lin-Gang Pilot Free Trade Zone in Shanghai, will have the capacity to produce 100,000 12-inch wafers a month.


Apple Cedes Ground as Larger Fights Over App Store Brew in Court, Congress

Even after a week of tweaks to the Apple Inc. App Store, the core fight over the iPhone maker's market power remains for a federal judge and lawmakers in Brussels and Washington to decide.

The moves so far have appeased some. Japan's antitrust enforcer will drop its investigation into Apple as part of a deal announced late Wednesday. The company agreed to allow certain types of companies to include links within their apps for the first time to allow users to sign up on websites. The change makes it possible to bypass its payment system and, in turn, Apple's ability to capture a cut of the revenue. Another proposed deal announced last week to settle a class-action lawsuit by smaller developers would allow apps to communicate with users outside of the app about alternative payment methods for their services.


States Vow to Keep Fighting Purdue Pharma Settlement With Sackler Family

Some attorneys general are vowing to keep fighting the chapter 11 reorganization plan of Purdue Pharma LP and a $4.5 billion settlement with the family that owns the maker of OxyContin, which could force an influential federal appeals court to consider the scope of bankruptcy judges' power to end lawsuits over defective or dangerous products.

Attorneys general for Washington state and Connecticut as well as the attorney general for Washington, D.C. said they would appeal Wednesday's decision by Judge Robert Drain of the U.S. Bankruptcy Court in White Plains, N.Y. approving Purdue's chapter 11 plan and the settlement, which shields Sackler family members from opioid lawsuits. The judge's ruling also allows family-owned Purdue to exit chapter 11 after nearly two years as a public benefit company with a new name: Knoa Pharma.


James Simons, Robert Mercer, Others at Renaissance to Pay Up to $7 Billion to Settle Tax Probe

Current and former executives of hedge fund Renaissance Technologies LLC will personally pay as much as $7 billion in back taxes, interest and penalties to settle a long-running dispute with the Internal Revenue Service, the firm said, a tax settlement that may be the largest in history.

James Simons-the quantitative-investing pioneer who started Renaissance before retiring as the firm's chairman on Jan. 1-will make an additional "settlement payment" of $670 million, according to the firm. Mr. Simons will also pay back taxes related to his gains.


FAA Says Virgin Galactic Can't Fly Spaceship During Investigation

Virgin Galactic Holdings Inc. won't be allowed to operate space flights until aviation regulators finish investigating an earlier mission carrying billionaire entrepreneur Richard Branson, the Federal Aviation Administration said Thursday.

Virgin Galactic on Wednesday said the spacecraft, called the Unity, shifted out of its planned trajectory for one minute and 41 seconds as it returned to the ground on July 11, prompting the FAA to examine what happened. Three Virgin Galactic employees joined company founder Mr. Branson for the flight to the edge of space, which attracted extensive attention.


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