North American Morning Briefing: Investors Await Manufacturing, Jobs Data

OPENING CALL

Stock futures were mixed on Tuesday as growth was in focus, with data on manufacturing and the jobs market coming up, which will help determine the pace of Federal Reserve interest rate cuts.

Traders will have plenty of new information on the labor market over the next few days, starting with JOLTs report for August on Tuesday at 10:00 a.m. Eastern and culminating with Friday's nonfarm payrolls report for September.

Meanwhile, investors continued to absorb Jerome Powell's comments from Monday in which he said the economy was in good shape, and that if it performs as expected, "that would mean two more cuts this year, a total of 50 more [basis points]."

"Powell's remarks led to some doubts over whether the aggressive pace of the easing cycle priced by markets would materialize," Deutsche Bank said.

McCormick is scheduled to post earnings before the opening bell, with Nike , Cal-Maine Foods and Lamb Weston after market close and tonight's debate could be the final time the nation tunes in to hear from both parties with no other face-offs scheduled.

Premarket Movers

CVS Health is conducting a strategic review of its options, including a possible breakup of the industry giant, according to people with knowledge of the matter. Shares rose.

Postmarket Movers

PepsiCo is in advanced talks to acquire Siete Foods for more than $1 billion, The Wall Street Journal reported, citing people familiar with the matter.

Repare Therapeutics said it received encouraging early phase 1 data for its camonsertib inhibitor combined with palliative radiation for the treatment of metastatic tumors harboring an ataxia-telangiectasia-mutated mutation. Shares fell 3.8%.

Watch For:

ISM Report on Business Manufacturing PMI for September; Construction Spending for August

Today's Headlines/Must Reads:

- Dockworkers Launch Strike at Ports From Maine to Texas

- Auto Sales Idling as Prices Remain High

- 'Diamond City' Thousands of Miles From Ukraine Is Rocked by War

MARKET WRAPS

Forex:

The dollar continued to rise after Powell indicated on Monday that further interest-rate cuts would be gradual.

His remarks indicated that further evidence of labor market weakness would be required to encourage the Fed to deliver further 50 basis-point rate cuts, MUFG Bank said.

"The comments will place even more focus on the release of the latest nonfarm payrolls report on Friday."

The euro stayed weaker against the dollar after data showed eurozone inflation eased in September as expected.

With price pressures cooling and recent purchasing managers' surveys pointing to a sharp loss of economic momentum in September, the stars are all aligned for another ECB rate cut in October, Pepperstone said.

ING said the euro could fall further against the dollar after Lagarde hinted at an October interest-rate cut and Powell pushed back against aggressive policy easing expectations.

"The notion that an inflation-concerned ECB would move more carefully than the Fed on easing is crumbling."

The euro could fall below $1.1100 in the coming days if eurozone inflation eased while some fresh political risk premium could be built into the euro amid French budget concerns, it added.

Energy:

Oil prices edged lower in early trading as prospects of increased supply from OPEC+ offset risks of supply disruptions in the Middle East.

OPEC and its allies are set to gradually unwind some of its production cuts from December, raising concerns about an oversupplied market next year.

Meanwhile, the latest Chinese data showed factory activity contracted for a fifth consecutive month in September, fueling persistent fears of sluggish demand in the world's second-largest economy.

According to analysts, the market has become increasingly numb to Middle East tensions given that oil production hasn't been materially affected yet.

But supply disruption risks would increase dramatically if Iran became more directly involved.

Metals:

Metals edged higher in early trading, but the stronger dollar weighed on investor appetite.

The market reacted positively to stimulus measures after top Chinese cities rushed to ease home buying curbs, ANZ said, while the latest Chinese data showed factory activity contracted less than expected in September even though it shrank for a fifth straight month.

Gold futures were broadly stable after Powell's speech signaled a moderate pace in the easing cycle.

Legal & General said commodity markets were likely to enjoy plenty of new inflows from investors waking up to their crucial role in the energy transition over the next few years, adding that focus is currently on equities like miners and fixed income rather than the necessary raw materials like copper, zinc or nickel.

"The opportunity upside in metals is enormous."

Citi said prices for nickel, platinum group metals and uranium could spike should Russia restrict exports of the commodities.

TODAY'S TOP HEADLINES

Stellantis Recalls More Than 150,000 Hybrid Jeeps Over Fire Risk

Stellantis is recalling over 150,000 of its U.S. market plug-in hybrid Jeeps over a potential fire risk.

The news comes a day after the company saw its shares plunge nearly 15% as it cut its full-year earnings guidance, saying it will accelerate plans to trim bloated U.S. inventories and faced weaker demand across many of its markets.

OceanSound Raises Nearly $1.5 Billion to Back Government-Linked Businesses

OceanSound Partners has hit the upper limit on its second fund to back companies in highly regulated and government-linked industries in a particularly challenging time for private-equity fundraising.

The New York-based firm has collected $1.49 billion for OceanSound Partners Fund II, nearly double the amount raised for its debut pool, which closed in February 2022, the firm said. OceanSound raised the upper limit on its newest fund by $190 million in response to high demand, it added.

Maersk Cautions on Costs And Delays From U.S. Dockworkers Strike

A.P. Moller-Maersk said the U.S. dockworkers strike will affect supply chains, leading to delays in cargo movement, increased costs, and logistical challenges for businesses relying on U.S. East Coast and Gulf ports.

"Longer labor dispute durations may exacerbate disruptions, affecting import and export activities, container availability, and overall operational efficiency," it wrote in a customer advisory.

UAE's Adnoc Buys Germany's Covestro for $13 Billion

An oil producer from the United Arab Emirates has clinched a $13 billion-plus deal for Germany's Covestro-a big bet on chemicals as part of its effort to transform into a fully integrated energy company akin to Exxon Mobil and other U.S. majors.

Partners Group to Sell Metering Company Techem to TPG, GIC in $7.5 Billion Deal

Partners Group said it is selling Techem in a deal that values the German metering company at around 6.7 billion euros ($7.46 billion).

The Swiss private-equity firm said Tuesday that it agreed to sell its majority stake in Techem to U.S. asset manager TPG and Singapore sovereign wealth fund GIC.

That 5% CD Is a Great Deal-Until the Bank Calls It Back

The era of 5% cash returns is ending early for some investors.

Before the Federal Reserve began cutting rates in September, banks offered certificates of deposit promising high yields for locking up cash years into the future. The highest-yielding ones, with returns in excess of 5%, had features allowing the bank to "call" them before they mature, handing back the cash and accrued interest.

The Surprise Market Winner of 2024: The Great British Pound

"Credit rates are going up, up, up and the British pound is the envy of the world," exclaims Mr. Banks in the 1964 classic film "Mary Poppins." For the first time since the U.K. chose to leave the European Union, there may be some truth to that statement.

In September, sterling gained more than 1% against a broad basket of trading currencies, according to data from the Bank of England. Year-to-date, it is up 4.7%, thanks to gains of 4.7% and 4.1% against the U.S. dollar and the euro, respectively. This makes the pound the best performer among currencies issued by Group of Ten, or G-10, developed nations. It is now only a hair's breadth away from reaching its level on the day of the Brexit referendum on June 23, 2016.

Israel Sends Troops Into Lebanon, Escalating Fight Against Hezbollah

BEIRUT-Israel launched a ground operation in Lebanon, sharply escalating its offensive against the militant group Hezbollah days after killing its top leader in an airstrike in Beirut and heightening concerns of a wider war.

Israel said Tuesday morning that it launched a limited operation in villages in southern Lebanon near the border to attack Hezbollah targets and infrastructure. Those targets "pose an immediate and real threat to Israeli settlements on the northern border," the military said.

U.S. Positions Military Forces in Middle East to Deter Iranian Attack

WASHINGTON-The Biden administration is moving military forces to deter an Iranian response following Israel's stepped-up air campaign against Hezbollah and the start of a ground operation in southern Lebanon, U.S. and Israeli officials said.

Those moves come after the U.S. warned Iran and the militant groups it supports against targeting American personnel or escalating the conflict. U.S. officials are specifically worried that Iran might mount a new attack on Israel as retaliation for the killing of Hezbollah leader Hassan Nasrallah and its escalating military campaign in Lebanon.

Hurricane Helene Death Toll Rises as Rescuers Scramble to Reach Flooded Towns

Rescuers raced to reach isolated communities cut off by devastating floods in the wake of Hurricane Helene, as the death toll surpassed 100 across six states in the Southeastern U.S.

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October 01, 2024 06:39 ET (10:39 GMT)

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