By Geoffrey Smith
Investing.com -- The U.S. releases its official jobs report for September, and U.S. stock markets are positioned for the kind of slowdown in job creation that will bring the Federal Reserve's policy tightening cycle to an end sooner rather than later. Fed officials continue to insist otherwise. Elsewhere, U.S. President warns about Vladimir Putin's nuclear threats, and says the U.S. is looking at ways to punish OPEC for squeezing oil prices higher. Twitter and Elon Musk have their trial date postponed. Updates from AMD and Samsung are weighing on chipmakers and the broader technology sector, meanwhile. Here's what you need to know in financial markets on Friday, 7th October.
1. Jobs report to test Fed's mettle
The U.S. labor market report for September is due, with analysts predicting a gentle deceleration in job creation that – to judge by this week's commentary by senior officials – is unlikely to deflect the Federal Reserve from its current policy course.
Consensus forecasts are for a 250,000 gain in nonfarm payrolls, and a 0.3% nominal increase in average hourly earnings. Given that the price index for personal consumer expenditures rose 0.6% in August, this would represent a further drop in real incomes due to high inflation.
The dollar has steadied overnight after comments from Fed Governor Chris Waller and Chicago Fed President Charles Evans on Thursday, both of whom said they expected rates to keep rising next year, while Cleveland’s Loretta Mester warned against expecting any rate cuts in 2023. Evans said he expects a peak Fed Funds rate of 4.75%.
2. Biden warns of 'Armageddon' from Putin's nuclear threats
U.S. President Joe Biden raised the alarm about Russia’s nuclear posturing, saying it was the closest the world had come to "Armageddon" since the Cuban Missile Crisis of 1962.
“He’s not joking when he talks about potential use of tactical nuclear weapons or biological or chemical weapons because his military is, you might say, significantly underperforming,” Biden said, adding that his administration is looking for an ‘off-ramp’ for the Russian leader, who turns 70 today.
Finland’s Prime Minister Sanna Marin, at a meeting of European leaders, retorted that "the way out of the conflict is for Russia to leave Ukraine."
Government officials have said they have communicated to Russia that it would face “catastrophic” consequences if it used nuclear weapons in Ukraine, but have stopped short of confirming that it would retaliate in kind.
3. Stocks set to open mixed ahead of jobs report; Musk's Twitter trial postponed
U.S. stock markets are in a holding pattern ahead of the labor market release, but tech is underperforming after some weak updates from chipmakers overnight (see 4).
By 06:20 ET, Dow Jones futures were up 20 points, or less than 0.1%, while S&P 500 futures were down 0.2%, and Nasdaq 100 futures were down 0.5%. Despite that, they’re on course for weekly gains of over 4% this week, as investors have dismissed the Fed’s talk to bet that an economic slowdown will force it to reconsider hiking interest rates earlier than it thinks.
Stocks likely to be in focus later include, of course, Twitter (NYSE:TWTR) and Tesla (NASDAQ:TSLA), after a Delaware court judge agreed to Elon Musk’s proposal to postpone the scheduled trial. That gives Musk until October 28th to finalize the deal.
Also in focus will be Credit Suisse, which said it would vacuum up billions of dollars of its debt that have been dumped in recent days.
4. Chipmakers stumble after Samsung, AMD warnings
Two giants of the semiconductor sector released disappointing updates, citing a sharp drop in demand for their products.
Advanced Micro Devices (NASDAQ:AMD) said revenue for the quarter just ended was likely to be around $1.1 billion below what it forecast in August, and down 15% from the previous three months. It also said it will book a $160 million charge to mark down the value of its inventory.
South Korea’s Samsung (KS:005930) meanwhile said its operating profit in the three months through September is likely to have fallen by nearly one-third from a year earlier.
5. Oil hits three-week high as market digests OPEC+ cut decision
Crude oil prices rose to their highest in three weeks as the market digested the implications of the OPEC+ production cut announcement on Wednesday, which will reduce actual oil supply by around 1 million barrels a day from November.
U.S. lawmakers have responded to OPEC’s action by reviving the idea of legislation that would remove OPEC members’ sovereign immunity from antitrust lawsuits in the U.S. – something that would threaten the vast U.S. assets accumulated by Saudi Arabia and others over nearly six decades.
By 06:35 ET, U.S. crude futures were up 1.2% at $89.45 a barrel, while Brent was up 1.1% at $95.47 a barrel. Baker Hughes’ rig count and the CFTC’s positioning data are due later.