Payroll Plot By Reuters

A look at the day ahead in European and global markets from Wayne Cole.

It was a quiet start to the month, with holidays in the United States and Canada dampening liquidity ahead of a deluge of data that culminated Friday with US payrolls. Wall Street and European stock futures were all little changed.

August Asian PMIs were decent, with China’s Caixin rising to 50.4 and above forecasts of 50.0, although it also showed the first drop in new export orders in eight months. Chinese shares continued to fall, however, led by losses in the real estate sector.

Japan’s PMI also improved to 49.8 as business investment gained momentum in the second quarter. Markets are still betting that the BOJ will avoid hiking in October, although the meeting is right at the end of the month and there will be a lot more data under the bridge until then. As long as he doesn’t pass out, he might want to return to the policy of normalization.

For the Fed, markets are betting that the size of a rate cut in September could depend on the wages report, given that Chairman Powell has been adamant that they do not want to see further weakness in the labor market.

A forecast-in-line result of +165,000 and 4.2% would likely see the 50 basis point chance fall further, although it would take an extraordinarily strong report to cause markets to give up 25 basis points basic.

Forecasts range from +100,000 to +208.00 and from 4.1% to 4.4%, and any such latest reading would rekindle recession talk and prompt investors to cut rates by half a point. Futures are 100% for 25bp and 31% for 50bp.

Fed Governor Christopher Waller and New York Fed President John Williams speak after the jobs data, giving the market almost instant reaction.

Also important this week will be ISM surveys, JOLTS job openings and ADP employment, trade and the Fed’s Beige Book.

The Bank of Canada is expected to cut rates on Wednesday, with markets implying a 22% chance of a 50 basis point cut, given signs that the economy paid off in July.

For currencies, the euro did no favors with victories for far-right parties in German state elections, which added a new layer of political uncertainty over the fate of the EU. It is fixed at $1.1050 with support on the downside at $1.0948. The dollar fell to 146.00 yen after an early peak of 146.60.

Key developments that could influence markets on Monday:

– S&P Global PMI for Germany, France, UK and EU

– Introductory statement by the ECB’s banking supervisor, Claudia Buch, at the hearing of the Economic and Monetary Affairs Committee of the European Parliament