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This isn’t a market moving report because it’s a composite of data that’s already released but it’s a good view of how the labor market has returned to 2019 levels.

This article was written by Adam Button at www.forexlive.com.

• Prior was -0.6% (revised to -0.3%)
• Inventories +0.2% vs +0.3% expected
• Prior inventories -0.6%

This is a good number and points to some decent growth still ongoing in the US, note the revision higher as well. Inventories are a slight drag but if sales keep up, they will improve later.

Overall though, this is a low-tier indicator.

This article was written by Adam Button at www.forexlive.com.

The major US stock indices are off to a solid start to the trading week after the declines last week. The NASDAQ index tumbled -5.77% which was at a worst trading week since January 2022. The S&P index fell -4.25% it was the week since March 2023. They Dow industrial average fell -2.93% which was its worst week since March 2023.

A snapshot of the major indices nine minutes into the open showing:

• Dow industrial average up 252.40 points or 0.63% at 40597.82
• S&P index is up 46.03 points or 0.85% at 5454.46.
• NASDAQ index is up 182.29 points or 1.09% at 16873.12

The small-cap Russell 2000 is up 7.86 points or 0.38% at 2093.27.

This article was written by Greg Michalowski at www.forexlive.com.

A few equity indexes are starting to look like this chart, from 2007.

Back then the problems in US housing were starting to mount and in July/August we got a sharp selloff in stocks, including 7% in the S&P 500. Then, it recovered to touch a marginal new record high that autumn, and ultimately the worst bear market in decades, culminating in a decline of more than 50%.

I remember that new high vividly and thinking that the market was signaling that Fed cuts would be enough. I certainly wasn’t convinced then and the bearish engulfing candle on that weekly chart was a strong signal to head to the sidelines.

How does the weekly chart look now? We got a slightly larger 9.2% decline in July-August and rebounded more quickly. Of course, we didn’t get a new high in the S&P 500, though many global equity indexes did, including the DAX and Toronto TSX Comp. The latter looks particularly like the 2007 chart but the S&P 500 is also flashing a real reversal pattern and the failure to break the July high is a double top.

Unlike in 2007, I can’t make a compelling case for why stocks should tumble and I certainly don’t see a financial crisis on the horizon. That said, I can think of a few reasons for a tumble from here:

• Sept seasonals are poor, it’s the worst month
• The Fed isn’t likely to cut quickly enough and is already behind the curve
• The AI trade looks like it wants to take a break
• Valuations are much higher than they were in 2007
• The election is in 59 days
• Fund managers are sitting on health YTD gains (or at least they should be)
• Bonds are still offering a decent alternative

With futures posting a nice bounce today, note that the next weekly candle on the 2007 chart was good before it all fell apart.

This article was written by Adam Button at www.forexlive.com.

Jim Reid at Deutschebank makes a great point in a note today. He illustrates that US unemployment has risen to 4.2% from 3.4% almost entirely due to people entering or re-entering the labor force.

Then goes on to warn that it can quickly change to something problematic. A look at the past 13 recessions shows that when you do get a first negative print on non-farm payrolls, it
tends to happen out of nowhere and tends to be the start of a trend.

Reid writes this:

The risk for the Fed is if and when job
losses actually arrive in the payrolls report, you tend to get little warning
(as we showed in Friday’s CoTD). With hiring now relatively soft it wouldn’t
take much for the Fed to be behind the curve and a string of 50bp cuts to
follow. With markets now pricing in over 250bps of cuts by January 2026 there
has to be a reasonably high market expectation in the fixed income space of
this policy error occurring.

That’s a great way of framing it and helps to explain why bonds have held a really strong bid despite some decent economic data.

This article was written by Adam Button at www.forexlive.com.

The Fed is in the blackout period until after the FOMC decision and the US economic calendar is light today, featuring only wholesale inventories and employment trends.

That will give the market a chance to catch its breath after a hectic week to start the month. It’s also a chance to look abroad and digest the woes in China. Iron ore prices hit the lowest since 2022 today in a solid proxy for Chinese demand.

We also got Chinese CPI and PPI and both were below expectations at +0.6% y/y and -1.8% y/y, respectively. Those raw numbers tell you all you need to know about the ammunition that the PBOC has but is reluctant to use because of currency worries. The good news is that the currency has firmed so they have some room to ease.

Will they take it?

On Friday we get Chinese industrial production and retail sales data. Another round of bad numbers should ramp up the pressure.

This article was written by Adam Button at www.forexlive.com.

• NHC says disturbance expected to become a tropical storm later today, risk of life-threatening storm surge and hurricane-force winds along the Louisiana and upper Texas coasts by mid-week.
• NHC says risk of life-threatening storm surge and hurricane-force winds along the Louisiana and upper Texas coasts by mid-week.

This article was written by Arno V Venter at www.forexlive.com.

• Dutch Economic Affairs Ministry will have to study Draghi report.
• Dutch Economic Affairs Ministry says extra public investments should not be an end in itself.
• Dutch Economic Affairs Ministry says agrees with Draghi on reducing regulatory burden.

This article was written by Arno V Venter at www.forexlive.com.

• China’s Xi urges stronger ties and fair business environment with Spain
• German Finance Minister backs Draghi’s growth focus but not joint EU borrowing
• Sentiment continues to improve through the session
• Draghi urges EU to boost spending by €750B and calls for joint debt issuance
• China seeks public input on carbon trading plan for cement steel and aluminium sectors
• NHC warns of potential surge and hurricane winds to Louisiana and Texas
• China to issue up to €2 bln in euro sovereign bonds in Paris on Sept 23
• What’s priced into money markets for upcoming September central bank decisions
• EU Sentix Index -15.4 vs -12.5 expected
• Greece plans €8-10 bln bond issue in 2025 aims for early bailout repayments
• China August passenger car sales down 1.1% y/y to 1.92 mln CPCA reports
• Swiss sight deposits dip slightly to 447.258 bln SFR in latest week
• Russian forces target energy facilities in 7 regions Ukraine’s Energy Ministry reports
• Japan backs ex-FX diplomat Masato Kanda for next ADB President
• Weekly update on interest rate expectations
• Russian military to participate in China’s sea and air drills in Japan and Okhotsk seas
• Market Outlook for the Week of 9th – 13th September
• Price action attempting a bit of a recovery from Friday’s moves
• What are the main events for today?
• Swedish Housing Prices 47% vs 43% prior
• Japan’s Takaichi says inflation is still weak when excluding external factors
• Today’s FX option expiry levels for the NY cut
• NHC warns of life-threatening storm surge and hurricane winds for Louisiana and Texas
• Japan’s Takaichi says strategic fiscal spending to boost jobs income and tax revenue
• Japan economy watchers poll 49.0 vs 47.5 prior
• German intelligence warns of Russian GRU cyber group targeting NATO and EU nations
• BofA forecasts Fed to start 25bps cuts from September 2024 and slowing in 2025
• Trafigura hints at possible $60 oil
• Russia’s coal exports to China drop 8% in H1 2024, rebound expected in 2025
• Goldman Sachs: OPEC to implement moderate production hikes in coming quarters
• What’s on the calendar for today?
• S&P Global expects OPEC+ to begin oil output increases in 2025

Markets:

• CAD leads, JPY lags on the day
• European equities higher;
  S&P 500 futures up 0.79%
• US 10-year yields up 2 bps to
  3.754%
• Gold flat at $2,497
• WTI
  crude up 0.93% to $68.29
• Bitcoin
  up 0.79% to $55,306

It’s been a
quiet session with no notable news release. The mood in the markets has been
positive but we will need to see how that evolves after the US cash equity
open. The US Dollar extended the gains following the better than feared NFP report on Friday.

Unfortunately,
this week is pretty bare on the data front as we head into the FOMC decision
next week. The market still sees a 25% chance of a 50 bps cut at the upcoming
meeting and a soft US CPI report on Wednesday might increase those
probabilities a little.

The focus
remains on the growth and labour market data though. For the growth data, we
have the US NFIB Small Business Optimism Index tomorrow and the University of
Michigan Consumer Sentiment on Friday. For the labour market data, we get the
latest US Jobless Claims on Thursday.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

U.S. Equity Strategy: BofA Global Research cuts energy sector to market weight from overweight.

This article was written by Arno V Venter at www.forexlive.com.

• China’s Xi meets with Spanish Prime Minister in Beijing – Chinese state media.
• China’s President Xi, in talks with Prime Minister of Spain: China and Spain should build long-term and stable relationship full of strategic determination, and push bilateral relations to a higher level – state media.
• China’s President Xi: Hopes Spain will continue to pay interest to Chinese enterprises, invest and develop businesses, and provide a fair, safe, and non-discriminatory business environment – state media.
• China’s President Xi: Hopes Spain will continue to play a constructive role in diplomatic relations between China and the EU – state media.
• China’s President Xi: China is willing to expand cooperation with Spain, strengthen communication and cooperation in international organizations such as the G20 – state media.

This article was written by Arno V Venter at www.forexlive.com.