Equity futures are trading roughly in line with fair value this morning as investors await the 8:30 ET release of the September Employment Situation Report (Briefing.com consensus 75K). All three major indices have settled at fresh record highs each day this week and enter Friday's session holding week-to-date gains between 1.3% and 1.7%.
Today's jobs report is expected to show slower job growth than in recent months due to the impacts of Hurricane Harvey and Hurricane Irma. The reading isn't expected to have much impact on the market's expectations for a December rate hike, but it may affect the number of rate hikes investors are anticipating for 2018.
Going into the release, the CME FedWatch Tool places the chances of a December rate hike at around 83.0%.
In addition, August Wholesale Inventories (Briefing.com consensus +1.0%) and August Consumer Credit (Briefing.com consensus $16.0 billion) will be released at 10:00 ET and 15:00 ET, respectively.
Outside of the equity market, Treasuries are trading lower this morning, sending yields into the green; the benchmark 10-yr yield is up two basis points at 2.37%. Meanwhile, crude oil is down 1.0% at $50.30/bbl, the U.S. Dollar Index is flat at 93.81, and gold is lower by 0.1% at 1,271.60/ozt.
In U.S. corporate news:
- Costco (COST 161.74, -5.33): -3.2% despite beating both top and bottom line estimates.
- Walgreens Boot Alliance (WBA 75.48, -1.47): -1.9% after Morgan Stanley downgraded WBA shares to 'Equal-Weight' from 'Overweight.'
Reviewing overnight developments:
- Equity indices in the Asia-Pacific region ended the week on a mostly higher note while China's Shanghai Composite remained closed for Golden Week. Japan's Nikkei +0.3%, Hong Kong's Hang Seng +0.3%, India's Sensex +0.7%.
- In economic data:
- Japan's August Overtime Pay +1.5% year-over-year (last 0.1%) and Average Cash Earnings +0.9% year-over-year (consensus 0.5%; last -0.6%). August Leading Index 106.8 (expected 107.2; last 105.2)
- Hong Kong's September Manufacturing PMI 51.2 (last 49.7)
- Australia's September AIG Construction Index 54.7 (last 55.3)
- In news:
- Reserve Bank of Australia member Ian Harper said the RBA could cut rates due to weak retail sales. The Reserve Bank of Australia left its official cash rate unchanged at 1.50% for the 14th consecutive month on Tuesday.
- Standard & Poor's noted that the deleveraging efforts of the Chinese government have resulted in asset growth in the domestic banking sector lagging nominal GDP growth.
- The U.S. Commerce Department deferred the anti-dumping decision regarding imports of aluminum foil from China. The decision will be made by the end of November.
- Major European indices trade near their flat lines while Spain's IBEX (-0.4%) and Italy's MIB (-0.7%) underperform. UK's FTSE +0.2%, Germany's DAX +0.1%, France's CAC -0.2%.
- In economic data:
- Germany's August Factory Orders +3.6% month-over-month (expected 0.7%; last -0.4%)
- UK's September Halifax House Price Index +0.8% month-over-month (expected 0.1%; last 1.5%); +4.0% year-over-year (consensus 3.6%; last 2.6%)
- France's August trade deficit narrowed to EUR4.50 billion from EUR6.00 billion (expected deficit of EUR5.40 billion)
- Spain's August Industrial Production +1.8% year-over-year (expected 0.9%; last 1.9%)
- Italy's August Retail Sales -0.3% month-over-month (expected 0.2%; last -0.4%); -0.5% year-over-year (last -0.4%)
- In news:
- Reuters reported that the Bank of Italy is seeking a softening of the new rule for handling of nonperforming loans. Starting in 2018, banks will have two years to cover 100% of the value of non-performing unsecured debt and seven years to cover secured bad debt. Italian banks are known for holding an outsized share of bad loans. Former Prime Minister Matteo Renzi said this rule will essentially prohibit lending to small and medium companies, weighing on growth.
- In Spain, the Catalan Parliament is scheduled to meet on Monday despite the session being blocked by Spain's Constitutional Court. The separatist roadmap suggests independence could be declared at that time.
- The European Commission is looking to expand the supervisory powers of the European Central Bank to include large investment firms.
- British Prime Minister Theresa May has responded to speculation about her ouster, saying she has full support of her cabinet.