The Friday Market Minute

  • Global stocks trade cautiously ahead of US payroll report as trade-related slowdowns in services and manufacturing rattle markets.
  • Economists expecting 145,000 net new jobs were added to the U.S. economy last month, but softer ADP and ISM employment data has investors on edge.
  • CME Group's FedWatch tool suggest an 87% chance of an October rate cut as investors look for more monetary support in a slowing U.S. economy.
  • Oil prices flat as the dollar retreats on rate-cut bets and reports confirm a return to full output capacity in Saudi Arabia.
  • US equity futures suggest another weak open on Wall Street ahead of the September non-farm payroll report at 8:30 am Eastern time.

Market Snapshot

Wall Street futures drifted lower Friday, while global stocks traded cautiously amid a surge in save-haven assets, as investors await a key reading on U.S. job creation that could cement the case for an October rate cut amid increasing signs of trade-related weakness in the world's biggest economy.

The September jobs report, due at 8:30 am Eastern time, follows grim assessments of both the country's manufacturing and services sectors, with economic activity falling to a decade low for the former and the weakest in three years for the latter, each based on slowing global commerce linked to the U.S.-China dispute.

Economists expect U.S. employers to have added 145,000 new jobs last month, just ahead of the 130,000 pace recorded in August, but softer-than-expected readings for private sector job gains from payroll processing group ADP, as well as the slowest pace of services hiring in three years from the ISM non-manufacturing survey yesterday, suggest the consensus estimate could be too optimistic. 

With global factory activity also slowing to near-decade lows, and the WTO warning that a "darkening outlook for trade" is hampering growth and job creation, traders are increasing bets on a near-term interest cut from the Federal Reserve, which meets at the end of this month in Washington, in order to support the slowing domestic economy.

Against that backdrop, U.S. equity futures suggest only modest declines ahead of the Friday jobs report, following solid rebounds in late trading Thursday after the weaker-than-expected ISM reading, with contracts tied to the Dow Jones Industrial Average indicating a 100 point pullback and those linked the S&P 500 guiding to a 12.2 point dip for the broader benchmark.

The CME Group's FedWatch tool is pricing in an 87.1% chance of an October rate cut, which would lower the Fed's target range to 1.5% to 1.75%, with bets on a further reduction between now and the end of the year rising to just under 50%.

The moves have added downward pressure to benchmark Treasury yields, which have fallen for six consecutive sessions, taking 2-year notes to 1.394% and 10-year paper to 1.527%

The U.S. dollar index, which tracks the greenback against a basket of six global currency peers, was marked only modestly lower at 98.85 in overnight trading, however, even as the save-haven yen leaped to a one-month high of 106.74 in the risk-averse session.

European stocks opened modestly higher from last night's close, with support coming from out-sized gains in the tech sector following a report from Japan's Nikkei business daily that Apple (AAPL) - Get Report is increasing its iPhone 11 production rates by as much as 10% to meet increased demand. 

The benchmark Stoxx 600 index was marked 0.04% lower by mid-day trading in Frankfurt, while Britain's FTSE 100 added 0.13% in London as the pound eased to 1.2333 against the U.S. dollar.

Overnight in Asia, investors shrugged off the stronger yen to give the Nikkei 225 a 0.32% boost as the late-session rally on Wall Street spilled over into regional trading, but that bid quickly faded as markets elsewhere began trading, taking the region-wide MSCI ex-Japan benchmark to a third weekly decline.

Global oil prices were also muted in the early European session, with traders citing slowing factory and services growth, as well as reports suggesting Saudi Arabia had returned to full production capacity follow last month's drone attacks on two key facilities, as downside influences.

Brent crude contracts for December delivery, the global benchmark, were seen 47 cents higher from Thursday's New York close to trade at $58.17 per barrel while WTI contracts for November delivery, which are more tightly linked with U.S. gasoline prices, were marked 25 cents higher at $52.70 per barrel.