"Binary" outcome likely for jobs report
STOXX 600 down 0.3%
Focus on nonfarm payrolls
Oil, mining stocks lag
Wall St futures lower
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"BINARY" OUTCOME LIKELY FOR JOBS REPORT
Analysts at Citigroup and Barclays are both expecting the outcome from today's U.S. payrolls report to be binary, with a soft number reigniting hard-landing fears and a strong number suggesting July's weak print in early August was a false alarm.
Economists surveyed by Reuters expect the U.S. to have added 160K workers to nonfarm payrolls in August and the unemployment rate to have fallen back to 4.2%.
"If forecasts are right, we suspect equities and cyclicals will enjoy a relief rally, alongside bond yields rising, supporting a soft landing scenario", Barclays strategist Emmanuel Cau said.
In that scenario, Citi would expect a 25 bp cut from the Fed this month.
Their own forecast though is for the unemployment rate to hold steady at 4.3% and 125K payrolls, which they think could trigger a 50 bp move from the Fed.
“ Reprinted with permission of Citi Research. Not to be reproduced.”
"In the case of a weak set of numbers, we believe the price action is likely to rhyme with August," Citi analysts said in a note.
"Yes, it is true that the second time around a similar shock hurts markets by less, but at this stage we have priced out enough of the initial reaction to early August for the market to be vulnerable again to bad news in the form of a weak NFP."
In that scenario, Citi likes short U.S. equities, short AUD/JPY and long investment grade credit.
Despite fears on the markets in early August, equities are still hovering close to their highs, suggesting investors are betting the U.S. economy will likely avoid an outright recession.
The 'good is good'/'bad is bad' approach seems to be back.
“Reprinted with permission of Citi Research. Not to be reproduced.”
(Matteo Allievi & Samuel Indyk)
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FRIDAY'S OTHER LIVE MARKETS POSTS:
THE BARNIER EFFECT CLICK HERE
STOXX 600 FALLS BEFORE PAYROLLS TEST CLICK HERE
EUROPEAN FUTURES SLIP BEFORE HOTLY ANTICIPATED JOBS REPORT CLICK HERE
ALL ABOUT THEM PAYROLLS CLICK HERE
Brent crude oil price in USD per barrel https://reut.rs/3TlxM4q
The beleaguered yen has started bouncing back https://reut.rs/3zasVfj
European shares fall before U.S. payrolls test https://reut.rs/3Xh1ZT7
Citi scenarios https://tmsnrt.rs/3Xn4T9g
citi scenarios 2 https://tmsnrt.rs/3Tn0kub
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