When the bad can be good

A new record for the equity markets in New York, stable bond yields and a falling USD: the market is calmly awaiting the August employment report in the US. The consensus is +725k, down from the last 2 months. The ADP figures suggest a much lower result, reflecting the surge in the delta variant. On the other hand, weekly jobless claims continued to fall. All in all, uncertainty is quite high. The pace of increase in hourly wages will also need to be monitored.

Services PMIs (and ISM) will be the other item of interest today, especially in the US. China’s Caixin index fell dramatically, highlighting the strong impact of the measures put in place to counter the resurgence of the pandemic: 46.7 in August after 54.9 in July. Chinese markets declined as Q3 GDP growth is expected to be much lower than expected. However, the likelihood of monetary policy easing is increasing. The same goes for the employment report: if the figures are disappointing but not too worrying, the markets will ultimately take the view that the Fed should not rush into monetary tightening and should react favourably.