United States
Wall Street closed higher overnight as investors braced for Friday’s crucial nonfarm payrolls report, with softer labour market data bolstering bets on Federal Reserve rate cuts. The S&P 500 climbed nearly 1% to a fresh all-time high, while the Nasdaq and Dow Jones each added 0.8–0.9%. Gains were underpinned by falling bond yields, as two-year Treasuries dropped to their lowest in about a year, reflecting confidence that the Fed will move on rates this month.
Markets had plenty to digest ahead of the jobs release. Weekly jobless claims rose to their highest since June, while private-sector payrolls increased by just 54,000 in August according to ADP data — well below expectations. Hiring plans also fell to their weakest level for any August on record. Economists now forecast nonfarm payrolls grew only 75,000 in August, marking a fourth straight month below the 100,000 threshold. The unemployment rate is tipped to rise to 4.3%, the highest in almost four years.
Bond markets rallied on the signs of weakness. The 10-year Treasury yield fell five basis points to 4.16%, with traders increasingly confident the Fed will cut rates in two weeks and deliver at least two reductions by year-end. Still, strategists warn that too sharp a slowdown could reignite concerns about stagnation or stagflation. “Data that show a gently decelerating, but not dire labour market would suit that goal,” said Steve Sosnick at Interactive Brokers. “Plunging data might bias the Fed to further cuts, but could also raise concerns that the central bank is too far behind the curve.”
In corporate news, Broadcom shares rallied late after delivering an upbeat outlook, while Tesla edged higher on news it had opened its robotaxi app to the public. Boeing was under pressure as it prepared to hire permanent replacements for striking workers at its St Louis defence hub. Meanwhile, American Eagle Outfitters surged more than 35% after reporting quarterly sales that doubled expectations, potentially buoyed by a controversial Sydney Sweeney ad campaign. Lululemon struggled, posting weaker sales figures, while General Motors scaled back launch plans for its Bolt EV amid uncertain demand.
On the policy front, Fed Chair Jerome Powell recently signalled a “shifting balance of risks” that could justify easing, while Governor Christopher Waller has floated the possibility of multiple cuts this year. The Fed’s dual mandate is firmly in play, with Friday’s jobs report set to determine just how aggressive policymakers might become.
Europe
European equities rose as calm returned to bond markets and investors priced in the likelihood of US rate cuts. The Stoxx 600 closed 0.6% higher, led by media and telecom names, with Publicis Groupe notching a second day of gains after upbeat management commentary. Cement majors Heidelberg Materials and Holcim also climbed after Goldman Sachs initiated coverage with buy ratings.
The session wasn’t without its weak spots. Sanofi slumped 8.3% after a clinical trial for a new eczema drug disappointed, while the travel and leisure sector struggled after Jet2 issued a profit warning, weighing on peers EasyJet and Ryanair. France’s CAC 40 finished 0.3% lower despite recovering from deeper intraday losses, as President Emmanuel Macron reportedly sought to avoid a snap election if his prime minister is ousted.
European markets have wobbled in recent weeks, coming off near-record highs as concerns over fiscal spending and bond market volatility weighed on sentiment. Still, analysts note positive signs, including renewed IPO activity and robust bond issuance. But caution lingers: “Everybody is looking for the catalyst for a pullback, and I think the bond market is going to be the potential reason,” said Angelo Meda of Banor SIM.
Australia
Australian shares are set for a positive open, with ASX futures up 38 points, or 0.4%, to 8854. The local market rallied strongly on Thursday, recouping half of Wednesday’s steep sell-off. The S&P/ASX 200 gained 1%, closing at 8826.5, driven by technology, consumer stocks and the big four banks.
Interest-rate-sensitive sectors led the rebound as US bond yields fell overnight. Commonwealth Bank climbed 2.1%, NAB and Westpac each rose 2%, and ANZ added 1.3%. Tech names also surged, with Xero jumping 4.8% after Wilsons Advisory flagged strong prospects, while Block rose 1.9% and Zip 3.6%. Consumer names including Myer (+3.9%), Wesfarmers (+2.5%) and Woolworths (+1.9%) extended gains.
Miners posted mixed results as iron ore prices rose 1.5% to US$104.80 a tonne. Rio Tinto gained 2.3% and Fortescue 1.8%, though BHP slipped 0.7% after trading ex-dividend. Energy names lagged, with Woodside and Santos each falling as Brent oil prices eased on reports OPEC+ may increase production. Gold miners also struggled as bullion slipped below US$3550 an ounce, with Bellevue, Ramelius and Northern Star all lower.
Corporate updates kept investors busy. Iress surged 7% after naming Andrew Russell as its new CEO. Austal climbed 4.3% after winning US Coast Guard approval for a $480 million patrol cutter order. Domino’s rose 1.4% after chairman Jack Cowin bought $5 million of shares, while KMD Brands gained 2.3% as it unveiled a store closure plan to revive earnings. On the downside, Boom Logistics fell 2.6% after revealing its former CEO misused up to $1 million in company funds.
Commodities and currencies
Commodities traded mixed. Oil retreated, with West Texas Intermediate falling 1% to US$63.35 a barrel and Brent slipping 0.9% to US$67.01. Gold eased 0.3% to US$3550.16 an ounce as investors rotated back into risk assets. Iron ore was a bright spot, gaining 1.5% on Chinese policy support.
In currency markets, the US dollar strengthened modestly. The Bloomberg Dollar Spot Index rose 0.1%, with the euro easing to US$1.1650 and sterling holding near US$1.3435. The yen weakened 0.3% to 148.49 per dollar. The Australian dollar dipped 0.5% to 65.1 US cents, reflecting the stronger greenback and caution ahead of tonight’s payrolls data.
Cryptocurrencies faced heavy selling, with Bitcoin down 2.2% to US$109,838 and Ether sliding 4.2% to US$4277. Analysts suggested profit-taking after recent gains, alongside heightened volatility in broader risk markets.
Bond markets were firmly bid. The US 10-year yield closed at 4.16%, Germany’s 10-year at 2.72% and Britain’s at 4.72%. In Australia, 10-year yields ended at 4.3%.
Economic Calendar
EU:
- GDP (QoQ Q2) 19:00
US:
- Non-farm Payrolls (Aug) 22:30
- Unemployment Rate (Aug) 22:30
This article was written by James Woods, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
