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The European and US indices rebounded on Monday, though the rebound was probably not based on high conviction, but looked more like the correction of last week’s decent selloff.

In the US, the 2-year yield consolidated below the 3.70% level, but the US dollar index rebounded ahead of Wednesday’s CPI data – that will certainly not change the expectation of a 25bp cut from the Federal Reserve (Fed) at next week’s policy meeting, but that could – if significantly different than expectations – revive or temper the dovish Fed expectations for the rest of the year. The EURUSD extended losses to 1.1040 and the USDJPY rebounded from August lows.

Apple closed nearly flat after revealing its new products yesterday. Apple Intelligence failed to impress.

Market’s attention will shift to politics as Donald Trump and Kamala Harris will face off in a debate today.

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Last week ended on an ugly note, really, as the jobs data from the US revealed throughout the week was weak, but maybe not weak enough to tilt the Federal Reserve (Fed) expectations toward a clear direction. US yields fell and the equities fell, the USDJPY fell to the lowest levels since August meltdown.

And if it’s not enough, the data released in the earliest hours of this week pointed that the Japanese economy recovered slower-than-expected but that the price pressures remained higher than expected in Q2, and that inflation in China came in below estimates as well, not helping to relieve the growing tensions about China and its sputtering economy. The Nikkei index is down by more than 0.60% at the time of writing and China’s CSI 300 is down by more than 1%.

US crude fell 1.75% on the back of the mixed US jobs data on Friday, closed last week below the $70pb psychological level, copper futures remain below the 200-DMA. Good news is, US futures are in the positive, hinting that we could see a small rebound after last week’s heavy selloff as attention shifts to Apple’s product reveal, US CPI update and the European Central Bank (ECB) decision.

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Risk appetite got another hit yesterday after the US ADP report printed a weaker-than-expected number and revived the worries that the US official jobs data could also disappoint for the second month in a row.

Many investors believe that today’s job figures could be pivotal in determining whether the Fed will cut rates by 25 or 50 basis points at its meeting later this month. Why this data is so important? Above all, it is because the Fed Chair Jerome Powell said that a further weakness in the jobs market is undesired. That’s obviously a good reason for investors to put a lot of weight on the jobs data.

But from a theoretical perspective, this month’s jobs data is especially significant as in July, the Sahm’s Rule was triggered, and the JOLTS report showed the vacancy rate fell below the key 4.6% threshold, which could push unemployment to 4.5%, according to Fed’s Waller’s research paper.

So investors are holding their breath and bracing for a potentially higher stress and volatility before the weekly closing bell.

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US equities remained under pressure yesterday after the JOLTS report revealed that the US job openings unexpectedly fell further in July to the lowest level since 2021. The US yields, the dollar and most major equity indices fell. On the other hand, the USDJPY dropped to the lowest levels since the beginning of August as the Bank of Japan (BoJ) Governor Ueda added more fuel to fire saying that the bank will continue to raise the borrowing costs if needed.

So you understood, we are living a situation of deja vu: rising dovish Federal Reserve (Fed) expectations combined with rising hawkish BoJ bets result in a movement of capital out of the risk of equities, and a flight into the safety of the Japanese yen. But this time around, the price action is not triggered by the actual data, but by the fear of seeing a second month of disappointment in the US jobs data.

Today, eyes are on the ADP report. The official jobs data is due tomorrow.

While waiting, we will also be watching the ISM figures, Broadcom earnings and the weekly crude oil inventories report. US crude slipped below $70pb yesterday despite OPEC’s earnings that they could step back on their plan to increase production next month.

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September began on an ugly note, to say the least. The bonds gained and US equities tumbled after the latest ISM data showed a fifth month of contraction in the US manufacturing, and at accelerated pace. The latter revived the recession worries ahead of this week’s critical US jobs data, and sent the S&P500 more than 2% down. This was the worst selloff since August 5, when a weak jobs data from the US had boosted the recession worries, the expectation of a 50bp cut from the Federal Reserve (Fed) and resulted in an almost 10% selloff of the S&P500. The technology stocks led losses, yesterday. Nasdaq 100 dived more than 3%, as Nvidia tumbled nearly 10% as part of the broader macroeconomic worries and suspected AI fatigue, and another 2.42% in the afterhours trading on news that the DoJ sent subpoenas to the company. Crude oil fell 5%.

All eyes are on the US jobs data – which has the potential to either make things worse or throw a floor under the recent risk selloff. Today, the job openings data is expected to show fewer job openings. On Thursday and Friday, the ADP and the official jobs data are expected to show a rebound in hiring and wages. And good news will be good news when the US reveals its latest jobs figures this week.

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The new week started with caution. The US and Canada were off, and news from Europe weren’t exceptional. The data released on Monday showed that the manufacturing PMI figures for August were slightly higher than expected, but numbers in major Eurozone countries remained below 50, in the contraction zone for another month. Volkswagen announced unprecedented factory closures in Germany. But the European indices gained, along with the euro. Mood is different this morning, with the US dollar broadly in demand against major peers.

All eyes are on the US jobs data this week. Investors around the world needs the Federal Reserve (Fed) to start cutting the rates as the sluggish China and slowing developed economies weigh on sentiment. Commodities and metals are under pressure, as mining companies are struggling to maintain the reflation enthusiasm alive.

And speaking of enthusiasm or the lack thereof, September is blamed to be a bad month for both equities and credit. And at the historically high levels, with a decent level of uncertainty regarding what the Fed should (and what the Fed will) do, the geopolitical tensions, war, energy crisis and so, there is little to make this September better than the others.

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August ended on a positive note. Friday’s data showed that the US PCE and the core PCE index stagnated near the levels printed a month earlier instead of a small uptick. Most US and European indices ended August at, or near record high levels, as tech-heavy Nasdaq underperformed.

This week, attention shifts to the all-important US jobs data this week – the last one before the Fed is due to start cutting its rates in September. This week’s data, could possibly see stronger-than-expected figures for August, which could further tame the jumbo cut expectations for the Fed and favour the scenario where the Fed would cut its rates by 25bp for the three remaining meetings this year. A sufficiently strong data could even boost the expectation that the Fed will cut only 2 times this year, by a total of 50bp. I believe that there is a greater chance for a hawkish revision in Fed expectations than a dovish one.

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Yesterday was could’ve been worse. A more than 6% drop in Nvidia somehow limited the S&P500 gains, but many stocks in the S&P500 gained yesterday after the latest GDP update came in better than expected and pointed that the US economy has grown 3% in the Q2 versus 2.8% printed earlier, while core prices eased more than expected. The US dollar rebounded, and growth, reflation friendly stocks did well.

Among them, the Stoxx 600 came close to a record. The euro weakened on the back of soft German and Spanish inflation update.

In Japan, a mixed bag of data helped the USDJPY stabilize near 145 level.

Today, the US will release the latest core PCE index, the Fed’s favourite gauge of inflation. The data is expected to hint at a tiny rebound in July. A stronger-than-expected read could lead to a further USD recovery. But even in that case, the Fed doves are more interested in jobs data than inflation figures. What would really change the game is… a strong jobs data from the US next week.

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Nvidia generated a record $30bn in sales in Q2 – up by 122%, the profits surged 166% to $16.6bn, the company said that they expect to sell $32.5bn in the current quarter (more than $31.9bn expected by analysts) and announced a $50bn share buyback program. It could hardly do better. But investors focused on Blackwell delay & rising competition.

Elsewhere, Super Micro Computer dived another 20% yesterday after announcing that they will delay filing its annual financial disclosures – a day after Hindenburg threw mud on the company saying that they had ‘glaring accounting red flags, evidence of undisclosed related party transactions, sanctions and export control failures and customer issues’. The delaying of the report naturally raises the odds that they might be right.

All in all, mood in the Big Tech is not great this morning. But the British and European futures seem little affected by Nvidia news. The futures point at a positive start this morning, and the waning appetite in Big Tech could cause more rotation toward the non-tech sectors as the Fed is on course to start cutting its interest rates in a couple of weeks.

Eyes are on the US GDP update & Eurozone CPI figures for the next two sessions.

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