U.S. Indexes closed the final trading session of the week mixed, as the tech-heavy NASDAQ 100 outperformed and saw gains, while the S&P finished in the red. The main event on Friday was the US jobs report, which was strong and saw a hawkish reaction across markets as it increased the likelihood of a Fed rate hike at the September confab. For that, the clear catalysts come this week via the US inflation reports, which will likely dictate what the central bank does; if the inflation numbers are hotter-than-expected, it is widely expected to make a Fed hike more likely. Following the dataset, and as mentioned, it was a broad-based hawkish reaction as Treasuries and spot gold saw pressure, while the Dollar gained. Thereafter, the Dollar pared some of its strength, and the Japanese Yen ended up being the G10 underperformer in the wake of choppy price action post-US jobs report. The crude complex eked out gains in a lack of US/Iran newsflow heading into the weekend. Trump said they may hit Pickaxe Mountain very soon. Lastly, sectors were predominantly in the red with Consumer Discretionary and Health lagging, with just Industrials and Tech sitting in positive territory. The US jobs report was strong, and heightened traders’ bets for a September Fed rate hike, with an implied probability of a 25 basis point hike now priced at 65% probability (versus 50% pre-release). The headline was strong and saw 162k jobs added to the US economy in August, above the expected 55k and the prior revised-up 21k. The Unemployment Rate was unchanged at 4.1%, as expected, while the participation rate lifted to 61.6% from 61.4%; the U6 unemployment rate declined to 7.7% from 7.9%. For the headline, private payrolls contributed 127k jobs (exp. 45k, prev. 71k), manufacturing 16k (exp. 5k, prev. 14k), and Government 35k (prev. -50k). Wages ticked higher by 0.3% M/M (from 0.2% prior), while the annual rate slightly cooled to 3.1% from 3.2%, but still above the consensus of 3.0%. All in all, Money Markets have moved more hawkish as it continues to show the labour market is in good health and steady. As such, and although it was already the case, it places paramount importance on next week’s inflation reports as they will highly likely determine what the Federal Reserve does at its 16th September confab; if inflation is hotter than the Wall St. consensus, a hike will get even more baked-in. Some of the recent comments from Fed members include the influential Waller supporting a hold at the September FOMC meeting if August inflation data shows continued progress. In most recent remarks from Fed Chair Warsh, he said he has work to do unless underlying inflation is moving clearly towards the 2% objective at sufficient speed. Elsewhere, Oil closed higher by 0.2% while Gold ended Friday’s session with a 1% fall following a volatile two-way trading session.
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