A look at the day ahead in U.S. and global markets from Mike Dolan
The red hot U.S. jobs market appears to be cooling as Labor Day nears, offering investors some relief in juggling the chances of one more Federal Reserve interest rate hike.
Stubborn inflation readings from Europe on Wednesday and hesitation around this week's China market rebound suggested the coast was far from clear despite worldwide stock and bond market rally in the previous session.
But a slew of U.S. employment statistics this week ahead of Monday's U.S. holiday is setting the tone for September markets overall and the Fed's next policy meeting on Sept. 20.
Even though the central bank is expected to stand pat next month, policymakers will deliver quarterly forecast updates and undecided markets are still leaning toward the chance of another quarter-point rate hike in November - hitting the rate that officials projected in June they would need to reach eventually.
Against that backdrop, Tuesday's news of a drop in job vacancies per unemployment worker in July to 1.51 - the lowest in almost two years - was seen as one argument the Fed may feel its rate hike campaign may be done already. The counter is that ratio is still well above pre-pandemic levels of about 1.2.
Ebbing consumer confidence in August reinforced the message of slowing activity, however, and The Conference Board's so-called labor market differential, derived from respondents' views on whether jobs are plentiful or hard to get, narrowed by almost six points to 26.2% - its lowest since April 2021.
That combination dragged futures pricing back to showing roughly a 50-50 chance of another hike in November from a one-in-three chance before the reports. Two- and 10-year Treasury yields recoiled up to 15 basis points to 4.87% and 4.10% respectively - and they hovered just above there overnight.
Wall's St's S&P500 clocked its best day in almost three months and its third straight rise for the first time in August. The Nasdaq 100 gained more than 2% for the first time since May and the high-octane NYFANG index of mega-cap digital giants added 3% in one day for the first time in three months.
Even the dominant cryptocurrency bitcoin surged more than 7% - aided by a major court ruling criticising the Securities and Exchange Commission's refusal to allow Grayscale to register an exchange-traded fund for spot bitcoin.
The dollar was the main loser, falling back about 0.5%.
Most of the big market moves on Tuesday have been sustained by stock futures overnight as traders await the next installment on the labor market picture, with ADP's private sector payrolls report for August due out later alongside second-quarter GDP revisions.
But the market mood overseas did sour a bit and cut across Tuesday's jump.
Spain reported a rise in August inflation above forecasts, while some German states saw inflation pick this month too. Euro zone economic sentiment fell again and missed expectations.
China's stock markets also stalled after a two-day rally, with U.S. Commerce Secretary Gina Raimondo claiming on her three-day visit to the country that many U.S. firms now see China as "un-investable".
Beijing has this year struggled to stave off a major property bust and underpin a spluttering economic recovery amid rising geopolitical tensions. But it seemed to draw a line under the stock market this week with a series of supports and the prospect of further cuts in lending, deposit and mortgage rates.
That ran into sand again on Wednesday and August has now seen foreign capital net selling of China stocks, via the northbound trading link, of more than 85 billion yuan ($11.66 billion) so far - the biggest monthly outflow on record.
In single stock moves, Denmark's Orsted (CSE:ORSTED), the world's largest offshore wind farm developer, plunged 20% after the firm said it may see U.S. impairments of 16 billion Danish crowns ($2.3 billion) due to supply chain problems, soaring interest rates and a lack of new tax credits.
Events to watch for on Wednesday:
* U.S. ADP August private payrolls, U.S. Q2 GDP revisions, July international trade, pending home sales, wholesale/retail inventories,
* International Monetary Fund Managing Director Kristalina Georgieva visits Beijing; U.S. Commerce Secretary Gina Raimondo speaks in Shanghai; UK Foreign Secretary James Cleverly in China
* U.S. Treasury auctions 7-year notes
* U.S. corporate earnings: Salesforce (NYSE:CRM), CrowdStrike (NASDAQ:CRWD), Brown-Forman, Cooper Companies
(By Mike Dolan, Editing by Louise Heavens, mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD)