FX.co ★ Bargain Hunting May Contribute To Initial Rebound On Wall Street

The major U.S. index futures are currently signaling a higher opening on Monday, suggesting that stocks may recover following the sell-off experienced last Friday. Investors might seize the opportunity to purchase stocks at somewhat lower prices after last week's significant decline, which pushed the Nasdaq to its lowest point in nearly a month.

Optimism regarding a potential interest rate cut by the Federal Reserve later this month could also drive early gains on Wall Street. This, despite ongoing concerns about the U.S. economic outlook. However, overall trading activity may remain somewhat subdued as market participants await key reports on consumer and producer price inflation scheduled for release later this week.

These upcoming reports are anticipated to show a deceleration in the annual rate of consumer price growth but an acceleration in the annual rate of producer price growth. While a rate cut by the Fed is widely expected, the incoming data could influence expectations regarding the speed and extent of these cuts.

The CME Group’s FedWatch Tool currently indicates a 75% probability of the Fed reducing rates by 25 basis points and a 25% chance of a 50 basis points cut.

On Friday, stocks moved sharply lower as traders reacted to the monthly jobs report. The principal indices registered notable declines, with the tech-heavy Nasdaq tumbling to its lowest closing level in nearly a month.

The major indices concluded the day near their session lows. The Nasdaq plummeted 436.83 points, or 2.6%, to 16,690.83; the S&P 500 dropped 94.99 points, or 1.7%, to 5,408.42; and the Dow fell 410.34 points, or 1.0%, to 40,345.41. For the abbreviated trading week, the Nasdaq fell by 5.8%, the S&P 500 declined by 4.3%, and the Dow decreased by 2.9%.

The market sell-off was driven by concern over the U.S. economic outlook following a Labor Department report showing employment growth for August was below expectations. Non-farm payroll employment increased by 142,000 jobs in August, short of the forecasted 160,000 jobs. Revisions to June and July employment figures also reflected a net downward adjustment of 86,000 jobs.

Meanwhile, the unemployment rate edged down to 4.2% in August from 4.3% in July, aligning with estimates. Although this modest decline suggests a higher likelihood of a 50 basis point rate cut by the Federal Reserve later this month, there is worry that the central bank may have delayed too long to prevent an economic recession.

"The large downward revision to payroll gains in the prior two months and the continued narrow concentration in payroll advances underscore that the labor market is losing steam rather quickly," commented Nationwide Chief Economist Kathy Bostjancic.

Semiconductor stocks suffered the most on Friday, with the Philadelphia Semiconductor Index diving by 4.5% to its lowest closing level in a month. Broadcom (AVGO) led the sector lower, plunging 10.4% despite reporting better-than-expected fiscal third-quarter results, due to disappointing revenue guidance for the current quarter.

Gold stocks also exhibited significant weakness, moving downward with the price of gold, leading the NYSE Arca Gold Bugs Index down by 2.7%. Banking stocks experienced considerable declines as well, resulting in a 2.6% drop in the KBW Bank Index. Additionally, oil service, computer hardware, and networking stocks saw notable downward movements, following the broader market trend.

### Commodity and Currency Markets

Crude oil futures are rising by $0.67 to $68.34 a barrel after a previous drop of $1.48 to $67.67 a barrel. Gold futures are up $7.50 to $2,532.10 an ounce, following a previous session decline of $18.50 to $2,524.60 an ounce.

On the currency front, the U.S. dollar is trading at 143.17 yen, up from 142.30 yen at the close of New York trading on Friday. Against the euro, the dollar stands at $1.1047, compared to last Friday’s $1.1004.

### Asia

Asian stocks declined on Monday amid persistent concerns about U.S. and Chinese economic growth. Reacting to Friday’s weak jobs data, U.S. Treasury Secretary Janet Yellen stated that the U.S. economy remains robust, and the recent cooling in job data signals a soft landing rather than a recession.The dollar showed volatility ahead of the upcoming August inflation data release and the Federal Reserve's policy meeting scheduled for September 17 and 18.

Gold remained subdued below $2,500 per ounce, while oil prices surged over 1% in Asian trading, rebounding from last week's significant sell-off.

Chinese and Hong Kong markets led regional losses as consumer inflation figures came in below expectations. The Shanghai Composite Index declined 1.1% to 2,736.49, and the Hang Seng Index dropped 1.4% to 17,196.96.

Official data indicated that China's consumer prices increased by 0.6% year-over-year in August, up from 0.5% in July but missing forecasts of 0.7%. Producer prices saw a 1.8% year-over-year decline, exceeding expectations for a 1.4% drop, following a 0.8% fall the previous month.

Japanese markets also experienced declines, marked by tech stocks tracking their U.S. counterparts lower. Tokyo Electron fell 2.3%, and Shin-Etsu Chemical lost 2.2%. The Nikkei 225 Index declined by 0.5% to 36,215.75, marking its lowest close since August 9 following a nearly 6% drop last week. The broader Topix Index ended 0.7% lower at 2,579.73, though both indices closed off their day's lows against a backdrop of gains in U.S. index futures and a weakening yen.

Japan's GDP grew by a seasonally adjusted 0.7% in Q2 2024, falling short of the 0.8% expected, which would have matched the previous quarter's growth. On an annualized basis, GDP rose 2.9%, missing the forecast of 3.1% growth.

Seoul's stocks ended slightly lower, with the Kospi falling 0.3% to 2,535.93. Samsung Electronics dropped over 2% on concerns regarding the global chip cycle.

Australian markets declined as financials and retail stocks led losses. The benchmark S&P/ASX 200 Index fell 0.3% to 7,988.10, while the broader All Ordinaries Index also slipped 0.3% to 8,191.90. Across the Tasman Sea, New Zealand's benchmark S&P/NZX-50 Index ended marginally higher at 12,621.62.

**Europe**

European stocks advanced on Monday in anticipation of consumer price inflation figures from Germany, Spain, and France due later in the week. The European Central Bank's governing council is set to meet on Thursday, and it is widely expected that board members will decrease interest rates for the second time this year.

In the United States, the Labor Department will release the consumer price index early Wednesday and the producer price index before markets open on Thursday. Mild readings could support a 50 basis point rate cut on September 18.

Meanwhile, the Eurozone Sentix Investor Confidence Index decreased to -15.4 in September from -13.9 in August, according to the latest survey. Investors also disregarded another survey indicating that the U.K. labor market had cooled noticeably last month.

The pan-European STOXX 600 Index was up 0.5% at 509.32 after suffering a 1.1% drop on Friday, its worst day since early August. The U.K.'s FTSE 100 Index rose by 0.6%, the French CAC 40 Index increased by 0.5%, and the German DAX Index climbed by 0.4%.

Entain surged as the gambling group's U.K. and Ireland online business returned to growth earlier than anticipated. Homebuilder Barratt Developments and lender Lloyds Banking Group advanced following the launch of a £150 million joint venture with the government body, Homes England. Conversely, German sportswear giant Adidas AG slumped after Barclays downgraded its stock rating from "overweight" to "equal weight."

**U.S. Economic News**

The Commerce Department is set to release its report on July wholesale inventories at 10 a.m. ET, which are expected to rise by 0.3%. At 3 p.m. ET, the Federal Reserve will publish its report on July consumer credit, predicted to increase by $12.5 billion.