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Breakfast Bites - Fri Sep 1, 2023

Rise and shine everyone and Happy Jobs Friday!

The US Unemployment report will be released at 8:30am ET. The overall consensus for Non- Farm Payrolls is +170k. The major banks have their own views:

  • Barclays = 200k

  • Deutsche Bank = 150k

  • Goldman Sachs = 149k

  • JP Morgan = 125k

  • Morgan Stanley = 155k

  • UBS = 210k

I tend to agree with Goldman Sachs and Morgan Stanley. I put the estimate at 153k.

Some of the estimates are much higher. But, there are a few things to consider here. Payroll is slowing and there has been a downward revision in each of the recent months. Add to that the ADP coming in at 177k. While the ADP is not a reliable measure, the level dropping is a sign that payrolls are slowing. ADP also doesn’t consider workers on strike.

The BLS’s strike report has indicated that about 21,000 workers were out of work in the August reference period as a result of strikes.

Finally, we’ve had a major bankruptcy - Yellow, the trucking company. They employed 30k workers. It will be interesting to see if that shows up in this months initial report or comes through a downward revision later on.

We also have the ISM Manufacturing numbers coming out later today at 10am ET. We’ve received the numbers from other regions. China improved while, Eurozone manufacturing deep in contractionary territory as final PMI revised lower.

The US will head into a long weekend for labor day so enjoy the US markets being closed on Monday! Remember liquidity may be extra thin today so trade with caution.

Asia and Australia

  • Asian equities mostly higher Friday in a subdued session. Japan to close higher with the Nikkei reaching fresh 33-year high; Australia closed slightly lower to underperform the region as miners weighed. Modest gains for mainland China markets with Hong Kong remaining closed on a typhoon warning.

  • Major banks including ICBC, Bank of China, and Agricultural Bank of China lowered deposit rates. Reductions range between 10 bp for 1y to 1.55% and 25 bp for 5y to 2.25%. This is yet another move to jumpstart spending - expecting people will save less if they earn less on their money.

  • China's Caixin manufacturing PMI mirrored official survey released Thursday with manufacturing operating conditions strengthening at fastest pace in six months. The index moved from 49.2 to 51, finally in expansionary territory. New orders rose the most - this is what we saw in the official numbers as well.

  • PMIs in Asia were mixed - South Korea's worsened slightly to 48.9. Taiwan saw another decline in new orders from overseas and domestic buyers, PMI fell at slightly reduced pace to 44.3 from 44.1.

  • PBOC announced a 200 bp RRR cut on foreign exchange deposits, taking the rate down to 4% from 6%, effective 15-Sep. Reuters calculated that would effectively free up $16.4B in foreign exchange with China's FX deposits standing at $821.8B at July-end.

  • Xi Jinping won't attend upcoming G20 meeting in New Delhi

  • Chevron Australia LNG workers reject company offer, risking disruption to 5% of global LNG

Europe, Middle East, Africa

  • European equity markets firmer after Thursday's softer close. Energy, Basic Resources and Technology outperform; Autos/Parts, Real Estate and Utilities lag

  • Eurozone final manufacturing PMI revised down to 43.5 versus flash 43.7 and July's 38-month low. Manufacturing PMI has been below the 50.0 level since July 2022.

  • The UK manufacturing PMI showed the downturn in the sector deepened in August, with a final reading of 43.0 versus flash 42.5 and prior 45.3 outturn.

  • UK house prices fall by biggest amount since July 2009. Prices down 5.3% y/y versus consensus for 3.9% drop and prior 3.8% fall. Recall that August 2022 was when house prices peaked.

  • Advisor to UK Chancellor urges rethink on BoE's 2% inflation target.

The Americas

  • Oil was helped this week by concerns about Hurricane Idalia (which ultimately impacted little oil infrastructure) and another week of big supply drawdowns in the US.

  • Tesla slashes model S, X prices in China following introduction of new Model 3. Model S was marked down -14%; Model X by -18%; Model X Plaid by -20.8% and Model S Plaid by -19.4%.

  • Lululemon beat and raised. Discussed exciting prospects for growth in H2.

  • Dell sales top estimates in positive signal for PC market

  • Broadcom earnings beat estimates, forecast disappoints

  • US airlines slump in August on rising oil prices, lower demand and earnings cuts


(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)

No earnings of note


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