US Jobs Report Sparks Initial Optimism, But ISM Manufacturing PMI Triggers Reversal

The financial markets witnessed a rollercoaster ride as the latest US jobs report initially boosted investor confidence, only to be dampened by unexpected developments in the manufacturing sector.

Key Factors for Today

• NFP Data Exceeds Expectations
• ECB Navigates Manufacturing Contraction and Rate Peaks
• Crude Oil Rises Amid Expected Saudi Cuts and OPEC+ Reduction Speculations
• China's Support Measures Boost Asian Markets and Strengthen the Aussie Dollar

Market Movers

• The US non-farm payroll (NFP) data for August reported 187,000 jobs added, surpassing the 180,000 forecast but with a slight uptick in unemployment to 3.8%.
• The average hourly earnings disappointed, growing by a modest 0.2%, initially providing room for the Federal Reserve to consider pausing rate hikes. However, optimism waned after the ISM Manufacturing PMI exceeded expectations, hitting 47.6 compared to the anticipated 47.0, hinting at persistent inflationary pressures and bolstering the dollar.
• The British pound (GBP) felt the impact as it lost 0.70% against the US dollar (USD), closing at $1.2584, with $1.2549 serving as lower support unless bulls can reclaim $1.2652.

Economic Calendar

• Bundesbank President Nagel Speech
• Dallas Fed Manufacturing Index
• Bundesbank Balz Speech
• Japan Unemployment Rate

The Big News

Eurozone Faces Economic Challenges

In the Eurozone, European Central Bank (ECB) official Francoise Villeroy noted that the ECB is "very close" to peak rates. Although options remain open for the next meeting, Euro Area Manufacturing PMIs confirmed contraction, with the French figures revised lower. This combination of disappointing data and a strengthening dollar led to a decline in the Euro (EUR/USD), which dropped to $1.0773, fuelling speculation of further descents towards the $1.07 handle if $1.0773 gives way, while potential delays could occur if bulls manage to overcome the interim resistance at $1.0823.

Crude Oil Surges on Saudi Production Cut Expectations

Crude oil prices extended their rally, with reports indicating a drop in Saudi Arabian crude production to 5.6 million barrels per day (bbl/day) in August, down from 6.8 million bbl/d in June. While increases in Nigeria and Iran's production offset this decline, crude oil prices surged on expectations that OPEC+ would announce additional cuts of 1 million barrels per day (bpd). West Texas Intermediate (WTI) crude reached its highest point since mid-November the previous year, hitting $86 a barrel, potentially opening the door to $87.40/bbl, provided that it maintains support above $84.80/bbl, with $83.50/bbl serving as a crucial level for bullish sentiment.

China's Support Measures Boost Asian Markets

Asian markets received a boost as the Chinese government unveiled new support measures for the property sector, resulting in early equity gains. Country Garden, a key player in the industry, secured extensions for some of its loans, alleviating concerns about China's credit situation. Meanwhile, Australia's economic performance remained strong, with August job additions surging by 1.9%, compared to 0.7% in the previous month. The Australian Dollar (AUD/USD) responded positively, rising by 0.34%, potentially paving the way towards the 65-cent mark, with $0.6440 emerging as a critical level.