Sentiment Improves Slightly Ahead of US Jobs Market Data

Equities recorded their fifth negative day in a row yesterday, although they managed to erase nearly all the daily losses in the last hours of the US session. Nevertheless, the medium-term outlook does not look optimistic for stocks.

It’s interesting to note that, historically speaking, we are now approaching the stock market’s worst month of the year. With an average decrease of 0.54% since 1950, September is the S&P 500’s weakest month in terms of historical seasonal patterns.

All eyes on the US labor market

One of the last pieces of economic data the Fed will receive before its September meeting, where it is expected to raise its benchmark interest rate once more, the August US employment report is scheduled for publication later today, and it will be closely monitored.

After soaring by 528,000 jobs in July, nonfarm payrolls are anticipated to have climbed by 300,000 this month. At the same time, the unemployment rate is projected to stay at 3.5%, while wage growth is seen ticking higher to 5.3% yearly. Today’s labor data announcement follows a warning from Fed Chair Jerome Powell on the necessity to keep tightening monetary policy even at the price of growing unemployment.

The market expects the Fed to deliver a 75 bps rate hike later this month, which would result in the 20th consecutive month of job growth, which would indicate that the labor market is adjusting to the abrasive rate hikes that have already been initiated.

According to data released yesterday, industry activity in China decreased in August as a result of power outages and Covid-19 production restrictions.

From 50.4 in July, the Caixin manufacturing purchasing managers’ index dropped to 49.5. This fell short of the 50.0 consensus expectation, which is the threshold separating contraction from expansion.