Jobs, oil dominate as port strike ends By Reuters

A look at the day ahead in US and global markets from Mike Dolan

Wall Street held up fairly well this week with a flat start to the final quarter, with September’s employment report now an obvious final hurdle on Friday and firmer oil prices irritating even as it ends the three-day American port strike.

As has been the case for weeks, markets are trying to balance signs of persistent growth, but at a pace weak enough to support disinflation and hopes of a Federal Reserve rate cut.

Labor market surveys so far this week certainly support the former, although strong job growth and a relatively modest bump in oil prices due to Middle East tensions have raised some questions about easing Fed speculation.

At least the threat that this week’s port strike could fuel retail price rises appears to have been averted. US East Coast and Gulf ports began reopening late Thursday after dockworkers and port operators reached a wage agreement to resolve the industry’s largest work stoppage in nearly half a century.

As Chicago Fed chief Austan Goolsbee pointed out on Thursday, retailers and manufacturers have stockpiled about two weeks’ worth of items in anticipation of the strike, and that should be enough now that the dispute is over.

This week’s rally in prices, compounded by US President Joe Biden’s comments on Thursday that Israeli retaliation against Iran’s missile attack could target Tehran’s oil facilities, has become a more unpredictable prospect as nerves over the weekend’s events may keep the merchants.

However, despite this week’s rise in crude oil prices, oil prices are back to where they were a month ago and continue to track annual declines of more than 10%. U.S. retail gasoline prices remain near eight-month lows.

So the stage is set for the September payrolls report later on Friday, with consensus forecasts for another 140,000 new jobs last month — close to August’s number — and the jobless rate steady at 4.2 percent.

Most of the week’s labor force updates — private sector payrolls, jobless claims, job openings and layoff data — show the labor market remains in relatively rude health.

So for all the cross currents this week, it has lost a little more than 0.5% so far and futures are higher at Friday’s open. The implied volatility captured by , however, remains high at around 20.

Changing interest rates and background geopolitics are more complicated for Treasuries, where 10-year yields rose a net 5 basis points this week to 3.85% – but remained close to Thursday’s overnight close.

Fed futures prices, with just 66 bp of rate cuts now set to end the year, are leaning toward two more Fed rate cuts this year rather than one of them being another 50 bp move.

The greenback was the big winner all week, not least as central banks around the world took more of a stance on interest rate signaling as expectations for the Fed eased.

But the greenback retreated slightly on Friday, partly as sterling recouped some of the heavy losses suffered when Bank of England Governor Andrew Bailey on Thursday spoke of more “activist” and “aggressive” BoE easing.

Bailey’s comments were tempered on Friday by his chief economist Huw Pill, who said “it will be important to guard against the risk of cutting rates either too much or too quickly”.

Stock markets around the world were marginally higher on Friday, with Hong Kong recently resuming its steep climb on China’s stimulus plans after a stumble on Thursday. The emaciated ones.

In Europe, attention has focused on European Union trade talks that have struggled to find consensus on raising tariffs by up to 45% on electric vehicle imports from China – with Europe’s auto sector taking multiple hits from the rivalry and pulling the industrial economy of the region.

With Germany voting against the tariffs over fears of Chinese retaliation against German carmakers, EU countries did not clearly vote for or against, leaving the European Commission to decide, EU sources told Reuters on Friday.

In a later statement, the Commission said the proposal to impose definitive tariffs had won the necessary support – but would continue negotiations with China “to explore an alternative solution that should be fully compatible with the WTO”.

European auto shares, which have been the sector’s worst performers this week, down nearly 7 percent on the tariff freeze and rising profit warnings, bounced back nearly 1 percent on Friday after the reports.

Elsewhere, the latest data on US money market funds showed that assets under management rose again in the past week to a new record of $6.46 trillion – confounding some who expected for money to flow out of these cash-like funds as the Fed’s interest rate cuts began.

Key developments that should provide more direction to US markets later Friday:

* September US employment report; Mexico August unemployment rate

* New York Federal Reserve President John Williams speaks

* US Corporate Earnings: Apogee (NASDAQ: ) Enterprises

(By Mike Dolan; Editing by Mark Heinrich; [email protected])