Morning Minutes

Nonfarm Payrolls Disappointment and Service PMI Numbers In Focus



The last day of trading before the Labor Day long weekend and the end of summer holidays finds US index futures sliding into the red following today’s US job numbers after being slightly positive for most of the morning. Overseas market action has been mixed with the Nikkei climbing 2.0%, the FTSE gaining 0.4%, the Dax flat and the Hang Seng sliding 0.7%. Currencies are quiet as are commodities with WTI crude oil up 0.3% trading just above $70.00/bbl and copper slipping 0.2%.

Even though a potential miss by US nonfarm payrolls had been suggested by Wednesday’s ADP payrolls miss, today’s report came in well below expectations (235K vs street 750K). Part of this can be explained by an upward revision to last month’s number (1,053K vs previous 943K). Adding to the ominous news, average hourly earnings (4.3% vs street 4.0%) were above expectations and continued to rise, indicating growing wage inflation. Overall these two numbers were mixed in terms of their impact on Fed policy with the headline job number leaning dovish and the wages number leaning hawkish.

European economic numbers have been sluggish this morning. Service PMI reports landed in the 55-60 range this morning, indicative of a moderate expansion but also generally a bit worse than expected. Eurozone retail sales missed by a lot (3.1% vs street 4.8% and previous 5.4%) slowing even more sharply than investors had thought.

US Non-Manufacturing PMI is due at 10:00 am EDT (street 55.2 unchanged). Investors may also keep an eye on the prices paid component (street 81.6 vs street 82.3) as an inflation indicator and the new orders component (street 61.7 vs previous 63.7) as a leading indicator.  

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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