HomeContributorsFundamental AnalysisSoft US Jobs Data, Further China Stimulus Fuel Appetite

Soft US Jobs Data, Further China Stimulus Fuel Appetite

Last week ended on a positive note, and this week started with a solid risk appetite, as the US jobs data hinted at a finally loosening jobs market, while Chinese stocks rallied on further measures deployed by the Chinese government to support the country’s faltering property market. In fact, the latest news suggests that more than 1800 new homes were sold in Beijing on Saturday alone after the government eased mortgage rules last week (vs. around 3100 homes were sold in Beijing during the entire August). The Hang Seng index jumped more than 3% this Monday before paring gains.

In the US, Friday’s jobs data was good, in terms of Federal Reserve (Fed) expectations. The US economy added 187K new nonfarm jobs last month, above expectations, but the unemployment rate ticked higher to 3.8% as the participation rate rose. The wages growth fell from 4.4% to 4.3% in August. The US 2-year yield, which is the most sensitive to changes in Fed expectations, tipped a toe below the 4.80% level, as investors took the opportunity to increase their bets that the Fed is certainly done with its rate hikes this cycle. Activity on Fed funds futures gives around 93% chance for another skip at the September meeting, and the probability of a pause in November has almost jumped to two thirds. The S&P500 recorded its best week since June, and rebounded to the highest level in a month, while Nasdaq 100 ended last week a few points below the 15500 level, and with trend and momentum indicators pointing at further strength.

Today, the US and Canada will be closed, but Europe is open for business and even though the week starts with a favourable risk appetite, there is nothing in the latest economic data to make the European investors cheer. Released last Friday, the euro area manufacturing PMI came in lower than expected, and posted the 14th consecutive month of contraction as the energy crisis continued taking a toll on activity in the old continent. Released earlier last week, the latest inflation estimate for the Eurozone showed that inflation in the euro-area stagnated, instead of easing further. In summary, activity is slowing but inflation is not – due to still too high energy prices, and that’s bad for the European Central Bank (ECB). There are now rising voices that the ECB won’t hike rates when it meets this month, although it’s hard to imagine Christine Lagarde announce a pause while weakness in economic activity isn’t yet reflected in price dynamics, and the European jobs market remains relatively strong.

US crude hits $86pb

The barrel of US crude traded past $86pb, as oil bulls continued buying the tight supply narrative from OPEC+. But looking at the crude’s impressive rally since the 24th of August dip, and taking into account that the RSI index now warns that oil has stepped into the overbought market conditions, we shall see a minor correction in oil prices this week, before an eventual push toward the $89/90pb area.

Elsewhere, the European nat gas futures remain highly volatile due to strikes in Australia. Hundreds of Chevron workers will be going on a strike on September 7. Strikes cause decent positive pressure and a lot of volatility in TTF futures. But the European nat gas reserves are full by around 90% and there is no particular urge for the European to rush to nat gas at the current prices. Therefore, the price rallies on strike news remain interesting short-term trade opportunities for top sellers.

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