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Jobs Data, Sinema Backs IRA, India Rate Hike - What's Moving Markets

Economy Aug 05, 2022 06:05AM ET
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© Reuters.

By Geoffrey Smith

Investing.com -- The U.S. is expected to have added 250,000 new nonfarm jobs in July - the fewest since November but still a decent number by historical measures. The Democrats water down their tax plans under the influence of Senator Kyrsten Sinema. Warner Bros Discovery slumps after announcing a possible move to free, ad-supported streaming. India raises rates by more than expected and oil slumps to a new seven-month low. Here's what you need to know in financial markets on Friday, August 5.

1. Jobs data

A week of data tracking the U.S. labor market’s strengths and struggles culminates with the release of the employment report for July at 08:30 AM ET (1230 GMT).

Analysts expect nonfarm payrolls to have risen by 250,000 through the middle of the month, which would be the slowest level of hiring since November and would represent a further - if still relatively gentle - cooling from the red-hot state it was in earlier this year.

Current inflation dynamics will ensure that the sequential increase in average hourly earnings draws attention, as well as the participation rate. Uber's (NYSE:UBER) earnings earlier this week gave a strong hint that the cooling of the economy and the end of pandemic-era savings is forcing people back into the labor market.

2. Sinema reportedly set to back IRA

Democratic Senator Kyrsten Sinema extracted significant concession from her party over its so-called “Inflation Reduction Act”, which is set to be the most important piece of U.S. economic legislation between now and midterm elections in November.

According to The Wall Street Journal, Democrats will pare back elements of a 15% minimum tax on large, profitable corporations and drop a proposed tax increase on carried-interest income, signaling yet another victory for the private equity industry that profits most from it.

To replace the revenues lost by that, the party will add a 1% tax on stock buybacks to the legislation, with a goal of reducing the federal budget deficit by $300 billion, the Journal said.

The IRA is intended to fund many of the Democrats’ favorite projects on climate and healthcare.

3. Stocks in holding pattern; WBD slumps on free streaming plan

U.S. stock markets are set to open in a holding pattern ahead of the employment report, which is set to have a huge influence on the size of the next interest rate hike from the Federal Reserve.

By 06:10 AM ET (1010 GMT), Dow Jones futures were up 24 points, or 0.1%, while S&P 500 futures were down by a similar amount, and Nasdaq 100 futures were down by 0.2%.

Stocks likely to be in focus later include Warner Bros Discovery (NASDAQ:WBD), which fell 10% in premarket after chief executive David Zaslav said it’s looking at the introduction of a free, ad-supported version of its streaming service. Markets didn’t like the implication for revenue and profit at the new spin-off.

Elsewhere, earnings season is starting to wind down but still has offerings from Canopy Growth (NASDAQ:CGC), DraftKings (NASDAQ:DKNG), Fluor (NYSE:FLR) and Wabtec (NYSE:WAB). Also of interest may be EOG Resources (NYSE:EOG), which rose 3% in premarket despite missing profit forecasts in its earnings update late Thursday. Overnight, Deutsche Post (ETR:DPWGn) and London Stock Exchange Group (LON:LSEG) both rose sharply after better-than-expected earnings.

4. India's rate hike tops expectations; Europe's industry holds up in June

The global monetary policy tightening cycle continued, as India raised its key interest rate by 50 basis points to 5.4%. As has been the case all year, the size of the hike came as a surprise to many.

Analysts nonetheless said they expected further increases to be more moderate, given signs that inflation pressures are easing. Food prices, in particular, have come off the boil in recent weeks, with the UN’s food price index falling for a fifth straight month in July.

India is set to overtake the U.K. as the world’s fifth-largest economy this year. Britain is facing 13% inflation and five straight quarters of economic contraction, according to the Bank of England’s latest forecasts, released on Thursday alongside its biggest rate hike in over 20 years. U.K. house prices, famous for defying gravity over decades, fell in July, according to a survey by lender Halifax.

Elsewhere in Europe, industrial production held up better than expected in June in Germany, France, and Spain, but fell in Italy.

5. Oil hits new seven-month low on risk-off moment; Iran talks set to resume.

Crude oil prices hit a new seven-month low overnight before recovering slightly, but still traded below $90 a barrel by morning in New York.

The Bank of England’s apocalyptic message had triggered a broader risk-off moment in global markets, specifically leading to the apparent capitulation of numerous oil bulls. CFTC data later (which run through Tuesday) may shed light on how positioning was going into that selloff.

Elsewhere, talks are due to resume on reviving the Iran nuclear deal that could lead to sanctions being lifted on the Islamic Republic. Actual progress – as opposed to just happy talk – remains hard to nail down, however.

U.S. crude futures were at $88.75 a barrel as of 06:30 AM ET, while Brent was up 0.2% at $94.33.

Jobs Data, Sinema Backs IRA, India Rate Hike - What's Moving Markets
 

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Comments (11)
Connecticut Yankee
A_Jaundiced_Eye Aug 05, 2022 9:21AM ET
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Obama always blamed Reagan for starting troubles, meaning things were wonderful pre-Ronnie. Now people are going to see how great the Days of Malaise REALLY were.
Brad Albright
Brad Albright Aug 05, 2022 9:21AM ET
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Obama never did any such thing. Try harder. Your shtick isn't working.
Marco cuevas
Marco cuevas Aug 05, 2022 8:55AM ET
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HEAR YE HEAR YE!! Jobs market is doing good...so fake financial journalism supported by big money wants a red market...hedge fund daddy needs his bonus and gf payments...it's take Friday folks and big money wants puts printing today see ya monday
Lex Wild
Lex Wild Aug 05, 2022 8:09AM ET
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FOMO, Rally ;-)
Kerry Drake
Kerry Drake Aug 05, 2022 8:07AM ET
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For every dollar that changes hands the government makes a minimum of 10% taxes, that dollar changes hands 110 times a year, that single dollar creates $16.50 per year, taxes or profit for the government. How can we possibly be it debt. How stupid is our government?
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Connecticut Yankee
A_Jaundiced_Eye Aug 05, 2022 8:07AM ET
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Brad Albright  He didn't say FEDERAL government; ALL governments.
Brad Albright
Brad Albright Aug 05, 2022 8:07AM ET
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LOL. Okie dokie. Your dogma is eating your reason.
Shirley Gohner
Shirley Gohner Aug 05, 2022 8:07AM ET
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Kerry is from Sri Lanka
Connecticut Yankee
A_Jaundiced_Eye Aug 05, 2022 8:07AM ET
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Brad Albright  Really? Okay, next time you get to the front of the checkout line, and they add in state sales tax to your bill, just tell them "But I already paid my taxes, on April 15th !"
Brad Albright
Brad Albright Aug 05, 2022 8:07AM ET
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That's not at least 10% and its not every dollar that changes hands. Dogma over precision.
SS ABCD
SS ABCD Aug 05, 2022 7:47AM ET
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We're going to create more debt and it will bring down the deficit???? The Democrats and there followers have truly lost ALL sense! Must be that shot that doesn't work,but, removes your brain!
Brad Albright
Brad Albright Aug 05, 2022 7:47AM ET
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More debt? You should familiarize yourself with the bill, because you sound like you don't know what you are talking about.
Shirley Gohner
Shirley Gohner Aug 05, 2022 7:47AM ET
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Brad Albright  - Higher taxes for a bloated government vs reduction of a pimple on blue whale's ****
Dave Jones
Dave Jones Aug 05, 2022 7:32AM ET
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It's going to be interesting to see the spin they put on this one. Bad news is good news. Good news is good news. Freedom is slavery. Ignorance is strength. War is peace.
Optimum integrated Services
Optimum integrated Services Aug 05, 2022 7:32AM ET
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my dear you are right
André Uruguay
André Uruguay Aug 05, 2022 7:32AM ET
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Well, in this case, good news are BAD news, because many people are betting on a ridiculous "Fed Pivot". Look the futures of $SPX right after the PAYROLL.
Mick Mena
Mick Mena Aug 05, 2022 7:25AM ET
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God help us and our children's children, Democrats are ******babies and our democracy.
Brad Albright
Brad Albright Aug 05, 2022 7:25AM ET
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Meanwhile, in the real world, it was Republicans responsible for a fraudulent and ultimately violent conspiracy to reject Democracy and overturn a presidential election, and it is Democrats with policies that will have a strong, safe and healthy America for our children's children.
Shirley Gohner
Shirley Gohner Aug 05, 2022 7:25AM ET
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Brad Albright  "violent conspiracy" only took one life.  Unarmed woman protester shot & killed by capital cop.  FBI covering up their undercover activity to incite.
Brad Albright
Brad Albright Aug 05, 2022 7:25AM ET
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zuron enterprises
zuron enterprises Aug 05, 2022 7:24AM ET
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Market will crash due to bad job data of last month as companies already stopped new job hirings and people loosing jobs
Jurgen Daub
Jurgen Daub Aug 05, 2022 7:24AM ET
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and there are still so may job openings that nobody wants to apply for. wherever you go not enough people to do the work
Stefan Krantz
SharpSthlm Aug 05, 2022 7:20AM ET
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What about Taiwan crisis? China sanction sand on taiwan to halt chip production
احمد محمود
احمد محمود Aug 05, 2022 7:18AM ET
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