Investing.com – Friday’s August employment report will be the main focus of the holiday-shortened week ahead as markets prepare for the Federal Reserve to begin cutting rates later this month. Meanwhile, the Bank of Canada is set to deliver another rate cut, oil prices look set to remain under pressure and China is set to release more manufacturing data. Here’s your take on what’s happening in the markets next week.
- Nonfarm payrolls
With the Fed preparing to cut interest rates for the first time in years, investors will focus on Friday in August for clues on how aggressively the central bank may move.
Fed Chairman Jerome Powell has signaled the time to start reducing interest rates, and many in the market expect the process to begin with a 25 point cut at the September 17-18 meeting.
Any signs of weakening in the labor market can revive fears over the prospect of recession that roiled the market in late July-early August. The effect that Japan does on trade increases sales.
Friday’s report was preceded by another update on the health of the labor market, starting with Wednesday’s report, which also contained data on layoffs. data on private sector hiring will be released there, together with the weekly report.
- market volatility
Wall Street stocks rose, and scored their second consecutive all-time closing high on expectations of a near Fed interest rate hike.
The market has rebounded since the early August selloff and signs that the rally is broadening are seen as an encouraging signal for investors worried about concentration in technology stocks.
Investors are also putting money into less-loved value stocks and small caps, which will benefit from lower interest rates.
But historically, September and October can be volatile months for stocks according to analysts at Bank of America and there are surprises from economic data that can cause fresh market shocks.
- Bank of Canada to cut back
Most are expected to pass a third consecutive rate cut when they meet on Wednesday.
The bank has cut its benchmark rate twice since June to 4.5% and the market now expects two more rate cuts this year after September.
Data showed that the Canadian economy grew at a slightly faster rate than expected in the second quarter but in a sign of weakness coming June growth was flat and Statscan said preliminary estimates show there will also be no growth in July.
Governor of the BoC Tiff Macklem hinted after the bank July in the change of focus of the bank towards boosting the economy instead of combating inflation.
- Oil prices are under pressure
Oil prices ended the week lower on Friday and pared monthly losses as expectations for an increase in OPEC+ supply from October were weighed.
Futures for October delivery, which expires on Friday, settled $ 1.14 lower at $ 78.80 a barrel, marking a decline of 0.3% for the week and 2.4% for the month.
US West Texas Intermediate futures settled down $2.36 at $73.55, down 1.7% on the week and down 3.6% in August.
Reuters reported on Friday that OPEC+ remained on course to increase output from next month due to the Libyan blackout and the promise of cuts by some members to offset overproduction offsetting the impact of sluggish demand.
Uncertainty over expected rate cuts from the Fed also weighed in as strong consumer spending data on Friday argued for faster easing. Lower tariffs could boost economic growth and demand for oil.
- Chinese data
China will release August data on Monday which is expected to return to expansionary territory after contracting in July.
Government data on Saturday showed that China’s activity fell to a six-month low in August as factory gate prices fell and owners struggled for orders, keeping pressure on Beijing for economic stimulus measures to boost household demand.
After a weak performance in the second quarter, the world’s second largest economy continued to lose momentum in July.
Policy makers have indicated a shift from the traditional strategy of investing heavily in infrastructure projects, rather than targeting stimulus efforts directly at households.
–Reuters contributed reporting