Article / 02 September 2016 at 7:00 GMT

Morning Markets: Nonfarm payrolls hog the limelight



  • UK August Construction Purchasing Managers' Index: 0830 GMT
  • US August Employment Report: 1230 GMT
  • US July Factory Orders: 1400 GMT

There's really only one show in town today and that's the US nonfarm payrolls data, anticipation of which has kept markets worldwide on tenterhooks all week. The importance of this data print can hardly be overstated because, as a key indicator of the state of the US economy, it'll be critical in determining whether the Federal Reserve opts to hike interest rates later this month. 

Expectations that we'll see a 25 basis points increase on September 21 have risen over recent sessions and the market is now pricing in a 34% chance that this will happen. The chance of a December move is seen as just shy of 60%.

The wait for the magic number has kept trading subdued across most asset classes and both gold and oil are on the back foot: Brent crude is heading for its worst weekly performance since March while gold looks like hitting its first two-week losing streak since July.

Asian traders and investors were very focused on the US in overnight trading and there was a clear case of pre-NFP jitters on in Australia as nervous investors pushed the S&P/ASX200 lower on fears that a strong US jobs number would encourage the Fed to hike rates.

Finally, the impending G20 meeting in Hangzhou, China, will attract plenty of attention. A Chinese vice finance minister has already hinted at possible fiscal policy moves at a pre-summit briefing in the city.

Market signals

Asian session

  • Asian markets were mixed ahead of US non-farm payrolls data
  • Crude prices were up on Friday but heading for biggest weekly falls since mid-January
  • Japan's Nikkei 225 gave up early gains; it was down 0.25% to 16,884.71 at 0445 GMT
  • The Shanghai Composite was down 0.16% to 3,058.42 at 0455 GMT
  • Korea's Kospi was up 0.23% to 2,037.36 at 0444 GMT
  • China’s Vice Finance Minister Zhu Guangyao says monetary policy is ineffective
  • Zhu has called for more fiscal policy support for the Chinese economy
  • He was speaking in Hangzhou, where G20 leaders will meet from September 4 to 5
  • The yuan has doubled its share of global FX trading in the past three years: Bloomberg
  • The rise of the yuan was revealed in a Bank for International Settlements survey
  • Indonesia's annual inflation rate has hit just 2.79%, below the central bank target
  • Guy Debelle was named as deputy governor of the Reserve Bank of Australia
  • Australia's robust housing market has peaked, according to broker CLSA
  • Jittery investors dragged Australia's S&P/ASX200 lower; it was down 0.72% at 0558 GMT
  • The S&P/ASX200 has now had six days of losses in just seven trading sessions

Forex ahead

  • The US dollar slipped on weak manufacturing data; it was worth ¥103.3630 at 0510 GMT
  • The Australian dollar held above 0.75; it was worth 0.7554 at 0510 GMT
  • A weak nonfarm payrolls number could prompt an Aussie dollar rally

From the Floor

Loonie lower. “The CAD is very weak and deservedly so,” says Hardy

WTI bounce? “Expect buyers to emerge ahead of $42/b,” says Hansen

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

The US employment report for August will be good enough to justify a rate hike in September, if the Federal Reserve really wants to do that, writes Juhani Huopainen.

Forex trader Max McKegg does not believe in screen watching all day long, but he is dismissive of the much-hyped set and forget strategy. 

Looking elsewhere 
You'd be forgiven for thinking Asians weren't at home in Asia today, given that all eyes in the region were focused on tonight's US NFP numbers for direction, says Saxo's Singapore team.

 China’s Zhu Guangyao has called for fiscal policy support for China's flagging economy, in the lead-up to the G20 meeting in Hangzhou, above. Photo: iStock

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