Today focus will be on the US ADP employment index

Market Movers

• Today focus will be on the US ADP employment index. Consensus is for an increase in ADP employment growth of 200,000 in August, up from 185,000 in July. The index will be scrutinised ahead of non-farm payrolls due for release on Friday but it is not necessarily an accurate leading indicator.

• US factory orders are also due for release and consensus is for an increase of 0.9% m/m, which is overall in line with the solid durable goods orders. If on the other hand factory orders surprise on the downside, it is likely to increase concerns about the US manufacturing sector following yesterday’s decline in manufacturing ISM.

• Given the high volatility in the oil market more attention than usual will likely be paid to the weekly US inventory data to be released today at 16:30 CET. Consensus expects a small rise following the large 5.5mb drop last week.

• In Denmark, the key focus will be on the release of the FX reserve for August.
  

Selected Market News

The US manufacturing ISM index was outright weak in August with the headline dropping to 51.1 from 52.7, much weaker than expected. New orders plunged to 51.7 from 56.5. Employment was lower as well and the customer inventory index jumped to 53.0 from 44.0. Both our short-term ISM model and the ‘new orders – customer inventories’ differential suggest a lower ISM over the coming months, possibly dipping to around 50.

Yesterday, Fed’s Rosengreen said in a speech ‘These developments might suggest a downward revision in the forecast that is large enough to raise concerns about whether further tightening of labour markets is likely.’ Although Rosengreen is regarded as dovish and does not vote this year, his comments, in combination with the weak ISM report, support our view that the probability of a Fed funds rate hike in September has ticked markedly down and our call that the Fed will wait until December before delivering a first rate hike.

Apparently, US President Barack Obama is close to having the necessary backing in the US Senate to protect the Iran nuclear deal from July in congress. It removes an important political risk that the nuclear deal would falter on the back of opposition in the US. This means that the implementation of the nuclear deal looks to remain on track, implying that Iran will likely see constraints on crude exports removed at the end of the year.