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Beyond the Numbers

Trading Activity May Remain Subdued Ahead Of Monthly Jobs Report
9/2/2021 8:58 AM

The major U.S. index futures are currently pointing to a higher open on Thursday, although trading activity may remain relatively subdued following the lackluster performance seen over the two previous sessions.

Early buying interest may be generated in reaction to a Labor Department report showing a modest decrease in first-time claims for U.S. unemployment benefits in the week ended August 28th.

The report said initial jobless claims dipped to 340,000, a decrease of 14,000 from the previous week’s revised level of 354,000.

Economists had expected initial jobless claims to edge down to 345,000 from the 353,000 originally reported for the previous week.

With the modest decrease, jobless claims fell to their lowest level since hitting 256,000 in the week ended March 14, 2020.

The weekly jobless claims data comes a day ahead of the release of the Labor Department’s more closely watched monthly jobs report.

Traders may stick to the sidelines ahead of the release of the monthly jobs report, which could impact the outlook for monetary policy.

Fed officials have indicated inflation has reached their target but they need to see further improvement in the labor market before they begin tapering asset purchases and raising interest rates.

Economists currently expect employment to jump by 750,000 jobs in August after surging by 943,000 jobs in July. The unemployment rate is expected to dip to 5.2 percent from 5.4 percent.

Stocks saw strength for much of the session on Wednesday before giving back ground in the latter part of the trading day. Despite the late-day pullback, the tech-heavy Nasdaq ended the session at a new record closing high.

The major averages finished the day on opposite sides of the unchanged line. While the Dow edged down 48.20 points or 0.1 percent to 35,312.53, the Nasdaq rose 50.15 points or 0.3 percent to 15,309.38 and the S&P 500 inched up 1.41 points or less than a tenth of a percent to 4,524.09.

The lackluster close on Wall Street came as traders continued to look ahead to the release of the Labor Department's closely watched monthly jobs report on Friday.

Meanwhile, traders largely shrugged off a report from payroll processor ADP showing much weaker than expected private sector job growth in the month of August.

ADP said private sector employment climbed by 374,000 jobs in August after rising by a downwardly revised 326,000 jobs in July.

Economists had expected employment to jump by 613,000 jobs compared to the addition of 330,000 jobs originally reported for the previous month.

"The Delta variant of COVID-19 appears to have dented the job market recovery," said Mark Zandi, chief economist of Moody's Analytics. "Job growth remains strong, but well off the pace of recent months."

A separate report from the Institute for Supply Management showed manufacturing activity in the U.S. unexpectedly grew at a slightly faster rate in the month of August.

The ISM said its manufacturing PMI inched up to 59.9 in August from 59.5 in July, with a reading above 50 indicating growth in the sector. The uptick surprised economists, who had expected the index to dip to 58.6.

Interest rate-sensitive commercial real estate stocks showed a strong move to the upside on the day, driving the Dow Jones U.S. Real Estate Index up 1.6 percent to a record closing high.

Notable strength was also visible among interest rate-sensitive utilities stocks, as reflected by the 1.2 percent gain being posted by the Dow Jones Utilities Average.

On the other hand, oil stocks moved significantly lower weakness despite a modest increase by the price of crude oil, with the NYSE Arca Oil Index falling by 1.6 percent.

Banking stocks also came under pressure over the course of the session, resulting in a 1.4 percent drop by the KBW Bank Index.

Commodity, Currency Markets

Crude oil futures are climbing $0.52 to $69.11 a barrel after inching up $0.09 to $68.59 a barrel on Wednesday. Meanwhile, after slipping $2.10 to $1,816 an ounce in the previous session, gold futures are falling $2.90 to $1,813.10 an ounce.

On the currency front, the U.S. dollar is trading at 11.04 yen versus the 110.01 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1842 compared to yesterday’s $1.1839.

Asia

Asian stocks ended mixed on Thursday as caution prevailed ahead of the release of the U.S Labor Department's closely watched monthly jobs report on Friday, which could shed more light on the Federal Reserve’s tapering strategy.

U.S. Fed Chair Jerome Powell said last week that the central bank is likely to start scaling back bond purchases this year depending upon the improvement in the labor market.

Chinese stocks rose notably after the People’s Bank of China said it would provide CNY300 billion ($46.41 billion) of low-cost funding to support small and medium-sized firms.

The benchmark Shanghai Composite Index climbed 29.94 points, or 0.8 percent, to 3,597.04, while Hong Kong's Hang Seng Index edged up 62.14 points, or 0.2 percent, to 26,090.43.

Japanese shares rose for the fourth straight day even as the country grappled with the unprecedented spread of the Delta variant of the coronavirus.

The Nikkei 225 Index rose 92.49 points, or 0.3 percent, to 28,543.51, while the broader Topix closed 0.1 percent higher at 1,983.57.

Semiconductor-related shares advanced, with Renesas Electronics climbing 3.8 percent and Tokyo Electron adding 1.2 percent.

Takeda Pharmaceutical fell over 1 percent after its Japanese distribution partner Moderna said tainted batches of its Covid-19 sent to Japan were contaminated with stainless steel particles. West Japan Railway plummeted 13.4 percent on equity dilution worries.

Australian markets ended lower after doctors warned that the country's hospitals weren't ready to cope with the government's reopening plans. The downside was capped after data showed the nation's trade surplus widened to a record in July.

The benchmark S&P/ASX 200 Index hit a two-week low before ending the session down 41.40 points, or 0.6 percent, at 7,485.70. The broader All Ordinaries Index slipped 29.20 points, or 0.4 percent, to 7,783.80.

Mining heavyweight BHP slumped 6.9 percent on going ex-dividend. United Malt Group lost 6.1 percent after the firm said it would make a $22 million provision in its full-year result.

Seoul stocks fell sharply amid profit taking after four days of gains. Inflation concerns weighed after data showed the country's consumer price inflation rose an annual 2.6 percent last month from a year earlier. The benchmark Kospi tumbled 31.17 points, or 1 percent, to 3,175.85.

KakaoBank plunged 7.8 percent on reports that the Korea Post offloaded the majority of its stake in the online lender. Tech heavyweights Samsung Electronics and SK Hynix fell over 1 percent.

Europe

European stocks are holding steady on Thursday as investors await the all-important nonfarm payrolls report due Friday for clues about the Federal Reserve's timelines for asset purchase tapering and interest rate hikes.

Eurostat data released earlier in the day showed Eurozone producer prices rose more than expected in July on the back of a jump in the prices for energy and intermediate goods.

Prices at factory gates in the 19 countries sharing the euro rose 2.3 percent month-on-month for a 12.1 percent year-on-year surge.

While the U.K.’s FTSE 100 Index is slightly below the unchanged line, the German DAX Index is up by 0.1 percent and the French CAC 40 Index is up by 0.2 percent.

Swedish Orphan Biovitrum has moved sharply higher after U.S. venture capital firm Advent International and Aurora Investment offered to buy the drug maker in a deal valued about 69.4 billion Swedish crowns ($8 billion).

Engineering firm Melrose Industries has also shown a strong move to the upside after it swung to a first-half profit.

Evotec SE shares have also risen. The German drug discovery alliance and development partnership company announced that Bristol Myers Squibb Co. (BMY) has exercised its option to enter into an exclusive global license for EVT8683.

Wizz Air Holdings has also moved higher. The low-cost airline said that it carried 3.58 million passengers in the month of August 2021, 50.4 percent higher than last year's 2.38 million passengers.

On the other hand, shares of miner BHP Group have shown a significant move to the downside on going ex-dividend.

Consumer goods maker Unilever has also fallen as JP Morgan downgraded the stock to Underweight from Neutral.

Shares of online trading platform CMC Markets have also moved sharply lower after cutting its full-year earnings outlook.

French speed-train maker Alstom SA has also fallen. The company said it would supply 35 additional Citadis tramways to Lyon's Public Transport Authority SYTRAL in France.

U.S. Economic Reports

A day ahead of the release of the closely watched monthly jobs report, the Labor Department released a report on Thursday showing a modest decrease in first-time claims for U.S. unemployment benefits in the week ended August 28th.

The report said initial jobless claims dipped to 340,000, a decrease of 14,000 from the previous week’s revised level of 354,000.

Economists had expected initial jobless claims to edge down to 345,000 from the 353,000 originally reported for the previous week.

With the modest decrease, jobless claims fell to their lowest level since hitting 256,000 in the week ended March 14, 2020.

The Commerce Department also released a report on Thursday showing the U.S. trade deficit narrowed in the month of July.

The report said the trade deficit narrowed to $70.1 billion in July from a revised $73.2 billion in June. Economists had expected the trade deficit to narrow to $71.0 billion from the $75.7 billion originally reported for the previous month.

The narrower trade deficit came as the value of exports jumped by 1.3 percent to $212.8 billion, while the value of imports dipped by 0.2 percent to $282.9 billion.

Meanwhile, revised data released by the Labor Department on Thursday showed U.S. labor productivity increased by less than previously estimated in the second quarter.

The report said labor productivity advanced by 2.1 percent in the second quarter compared to the previously reported 2.3 percent jump. Economists had expected the increase in labor productivity to be upwardly revised to 2.4 percent.

Meanwhile, the Labor Department said the increase in unit labor costs in the second quarter was upwardly revised to 1.3 percent from 1.0 percent. The increase in labor costs was expected to be downwardly revised to 0.9 percent.

At 10 am ET, the Commerce Department is scheduled to release its report on factory orders in the month of July. Factory orders are expected to rise by 0.3 percent in July after jumping by 1.5 percent in June.

The Treasury Department is due to announce the details of this month’s auctions of three-year and ten-year notes and thirty-year bonds at 11 am ET.

Stocks In Focus

Shares of Ciena (CIEN) are moving significantly higher in pre-market trading after the networking equipment maker reported fiscal third quarter results that exceeded analyst estimates on both the top and bottom lines.

Jewelry retailer Signet Jewelers (SIG) is also likely to see initial strength after reporting better than expected second quarter results and raising its full-year guidance.

Shares of Hill-Rom Holdings (HRC) may also move to the upside after the medical equipment maker agreed to be acquired by Baxter International (BAX) for about $10.5 billion.

On the other hand, shares of Chewy (CHWY) may come under pressure after the pet products retailer reported a wider than expected second quarter loss and provided a disappointing outlook.
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