Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher.
Traders are focusing on the unemployment rate and hourly earnings portions of this morning’s employment report. The unemployment rate increased to 3.8% when 3.5% was expected, and average hourly earnings were up 0.2% when up 0.3% was anticipated.
Nonfarm payrolls in August increased 187,000 when a gain of 170,000 was predicted.
Private payrolls were up 179,000 when up 147,000 was estimated, and manufacturing payrolls increased 16,000 when a gain of 2,000 was expected.
July nonfarm payrolls, July manufacturing payrolls and July private payrolls were all revised lower.
The 8:45 central time August manufacturing PMI is predicted to be 47.0, and the 10:00 August Institute for Supply Management manufacturing index is estimated to be 46.8.
Major downtrend lines have been taken out to the upside this week as the fundamentals have improved recently in the form of expectations of a less hawkish Federal Reserve.
CURRENCY FUTURES
The U.S. dollar index came under pressure when the U.S. employment report was released.
Interest rate differential expectations remain favorable for the greenback, especially against the European currencies, since the U.S. economy appears to be holding up relatively well compared to economies in Europe.
The U.S. dollar will probably recover from the morning selling, and higher prices are likely longer term for the greenback.
The August euro zone manufacturing PMI was 43.5 when 43.7 was forecast.
The S&P Global/CIPS U.K. Manufacturing PMI dropped for a sixth month in a row, falling to 43.0 from 45.3 in July. This was the lowest level in 39 months and was the 13th consecutive month the PMI has been below the 50 mark.
The Nationwide House Price Index in the U.K. dropped 5.3% year-on-year in August 2023, compared to a 3.8% decline in July and market expectations of a 3.9% decrease.
INTEREST RATE MARKET FUTURES
Futures are mostly higher in response to the U.S. employment data.
Loretta Mester of the Federal Reserve will speak at 8:45 central time.
Financial futures markets are predicting there is a 93% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at its September 20 policy meeting, and there is a 7% probability of a 25 basis point increase.
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