Base point after payroll, new iPhones and debate By Reuters

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

Wall Street futures found their feet after Friday’s overreaction to an otherwise middling jobs report — with Apple’s (NASDAQ: ) new iPhone and Tuesday’s presidential debate on the radar.

August’s payrolls report was modestly weaker than forecast, though a significant improvement from July. Downward revisions from previous months softened the picture a bit more.

But the report was neither strong enough to completely dispel fears of a slowdown and recession next year, nor was it seen as weak enough to push the Federal Reserve into a jumbo 50 basis point interest rate cut this month.

The Fed’s top policymakers, Christopher Waller and John Williams, have underlined expectations that tapering is coming from September 18 – the former even said the easing cycle should be “delayed”. But none seemed panicked enough to suggest another 50 bps was needed.

By the end, it was down 1.7% – posting a 4.5% loss for the week that is now the worst since March 2023 and once again underlining the seasonal downdraft that usually comes in September.

Following suit in a more measured fashion, Asian markets also slipped early on Monday.

And yet, while markets have scaled back the expected size of the Fed’s rate cut this month, there has been no change to the 112 bps of Fed rate cuts by the end of the year, nor the 235 bps seen over the next 12 months.

Ten-year Treasury yields hit their lowest since last June on Friday and yields on the two-year since March 2023. Both firmed slightly on Monday ahead of auctions of $119 billion in 3-, 10- and 30-year bonds. Treasury coupons.

US stock futures and European stocks rebounded smartly today ahead of another busy week – a likely second European Central Bank interest rate cut of the year, Thursday, Apple’s launch of its new AI iPhone , Monday and Tuesday’s televised showdown in White. House race.

The euro was on the back foot ahead of the ECB’s decision, with possible cuts to the central bank’s GDP and inflation forecasts for Thursday keeping alive some hopes of a third interest rate cut as soon as next month.

Even though the Fed appears to have clearly shifted its focus to the employment side of its dual mandate rather than the inflation side, Wednesday’s August CPI inflation report will be important to gauge the degree of ongoing disinflation .

In this regard, deflationary pressures from abroad remain strong, with China again posting deep annual producer price deflation of 1.8% last month and a weak consumer price inflation rate of just 0.6%, which missed, also the forecasts.

Commodity markets double because of this disinflation. Even though oil prices gained ground on Monday, they remain below $70 a barrel after hitting a 15-month low on Friday and are still down more than 20% year-to-date.

Inflationary expectations in the US market are quickly evaporating.

The 10-year outlook for inflation embedded in inflation-protected Treasuries is now at just 2.04% — the lowest level since January 2021. The two-year equivalent is just 1.87% — well below the Fed’s 2% target and increases the risk that a significant overshoot of this target may be in store.

The New York Fed releases its August survey of household inflation expectations on Monday.

Back to politics, the US election race heats up again this week with the first televised debate on Tuesday between US Democratic presidential candidate Kamala Harris and Republican challenger Donald Trump.

The stakes remain high as national opinion polls show the two are on again after a brief period in which Harris gained the upper hand after her nomination.

A poll by The New York Times and Siena College released Sunday showed the two effectively tied, with Trump up by one percentage point — 48 percent to 47 percent — over Harris.

The betting site PredictIt has them in the heat again.

In Europe, former ECB chief and Italian prime minister Mario Draghi presented his long-awaited report on reforming the European economy, urging the European Union to adopt a more coordinated industrial policy, faster decisions and massive investment if it is to keep pace with the United States United. and China.

In company news, all eyes will be on Apple’s new iPhone series later on Monday. Its shares were indicated up 1.6% before the bell, along with most other Big Tech megacaps.

The Financial Times reported on Saturday that the iPhone’s latest A18 chip, to be unveiled at Monday’s event, was developed using Arm’s latest V9 chip design.

And shares of Boeing (NYSE: late this week.

Key developments that should provide more direction for US markets later Monday:

* New York Fed inflation expectations survey, August US employment trends, July consumer credit; Mexico August inflation

* Apple unveils a new series of iPhones

* US Corporate Earnings: Oracle (NYSE: )

* US Treasury sells 3.6 month bills

(This story has been corrected to set Monday, not Friday, in paragraph 26)

(By Mike Dolan; Editing by Emelia Sithole-Matarise; [email protected])