Markets Overview: (Source: Bloomberg, FT, Reuters, DJ Newswires)

UK 100 Index called to open +5pts at 7435, just shy of the 7440 2-week hurdle preventing the index from a bullish breakout. Bulls are still hopeful of a breakout to trigger a 150pt bullish triple bottom reversal towards 7600 record highs. Bears eye falling highs since yesterday, and overnight failure to crack 7440, looking for a breach of 7420 overnight lows to ignite a retrace towards August lows around 7300. Watch levels: Bullish 7445, Bearish 7420

Calls for a muted, yet positive, start come courtesy of habitual investor reticence to take on more risk before the monthly US Jobs report. This stems from potential for the report’s components to sway sentiment on the speed of US monetary policy tightening, with a knock on to all asset classes.

Asian markets are, however, break-even to positive, following continued gains on Wall St (5th straight month of gains for Dow/S&P, 9th in 10 for Nasdaq), supported by more solid if not better than expected PMI prints overnight. Both China & Australia improved (China 6-month high), Japan was solid and India is back to growth.

Mnuchin saying the Trump administration had prepared a very detailed US tax plan also revived Trumpflation hopes to maintain risk appetite along with some talk of a stronger than expected jobs report, especially wages growth, this afternoon, to overcome weak data yesterday.

Hong Kong underperforms despite a JPM upgrade on Casino operators. Japan’s Nikkei outperforms as gains for industrials offset weakness among financials, while the latter holds Australia’s ASX back from China PMI inspired gains and an oil price rebound due to continued woes for Commonwealth Bank.

Large-cap US indices once again closed higher across the board yesterday, as the Dow Jones and S&P500 both finished August trading higher. This marks the fifth consecutive month that both indices have notched positive returns, although note also that the Tech-focused Nasdaq closed at a fresh all-time record high as Treasury Secretary Mnuchin once again ramped up tax reform rhetoric.

After yesterday’s sharp move higher on further US refinery closures, Crude Oil prices have paused overnight after the US dollar recovers from yesterday’s lows and both Brent and US benchmarks encounter resistance. Global benchmark Brent edged back from resistance at $52.90 after notching a fresh 3-week high, while its US counterpart has dipped from a 3-day high of $47.50.

Gold has fallen back from overnight highs as the US dollar finds support, having extended yesterday’s gains to within touching distance of Tuesday’s $1326 9-month highs. Non-Farm Payrolls data today could provide precious metal traders with further excitement as the data dump, closely watched by the US Fed, looks to repeat Wednesday’s impressive ADP print.

In focus today will be this afternoon’s US Jobs report (1.30pm) for updates on the key components of Non-Farm Payrolls, the latest Unemployment Rate and, with inflation so influential for the Fed’s rate hiking cycle, Average Hourly Earnings growth. The data could move the USD with a knock-on for commodities, other currencies (GBP, EUR) and of course major indices like the UK Index and DAX.

Ahead of that, listen out for further PMI Manufacturing updates from the likes of Spain, Italy, France, Germany and the Eurozone as a whole (8-9am). All are seen confirming improvements that may help the EUR, while the UK holds firm.

After the excitement of Non-Farms has calmed, US Manufacturing PMI (2:45pm) is expected to confirm another decline before ISM data (3pm) delivers a stable August. Note also expectations for a mixed bag from the Uni of Michigan (also 3pm) figures with Consumer Sentiment confirmed higher, Current Conditions lower and Expectations lower. Watch how the USD digests this.

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