ADP Report Suggests Healthy US August Job Gains

Economic Data

- (PL) Poland Central Bank (NBP) left its Base Rate unchanged at 1.50% (as expected)
- (US) MBA Mortgage Applications w/e Aug 28th: +11.3% v +0.2% prior
- (IE) Ireland Aug Consumer Confidence Index: 101.1v 99.7 prior
- (BR) Brazil July Industrial Production M/M: -1.5% v -0.1%e; Y/Y: -8.9% v -6.3%e
- (US) Aug ADP Employment Change: +190K v +200Ke
- (US) Q2 Final Nonfarm Productivity Q/Q: 3.3% v 2.8%e; Unit Labor Costs Q/Q: -1.4% v -1.0%e
- (MX) Mexico Aug Leading Indicators M/M: -0.09 v -0.09 prior
- (SG) Singapore Aug Purchasing Managers Index: 49.3 v 49.4e; Electronics Sector Index: 49.0 v 49.0e
- (US) Aug ISM New York: 51.1 v 68.8 prior
- (US) July Factory Orders: 0.4% v 0.9%e; Factory Orders Ex-Transportation: -0.6% v 0.5% prior
- (US) DOE Crude: +4.67M v 0Me; Gasoline: -0.27M v Me; Distillate: +0.12M v +1.0Me

The DJIA and S&P500 both closed down nearly 3% each on Tuesday for the worst first day of September trade since 2002, leaving both indices not very far from the lows hit during last week's huge selloff. Once again, the Shanghai Composite miraculously recovered from a -4.6% intraday low amid strong speculation Beijing was propping up stocks again. Futures saw good gains before the open today and the DJIA and S&P500 both opened up 1% or so and saw early gains, but indices have lost ground mid-morning. As of writing, the DJIA is up 0.97%, the S&P500 is up 0.67% and the Nasdaq has added 1.0%.

The August ADP jobs report slightly missed expectations, but remains practically in line with the +200K average seen for months. The consensus estimate for Friday's non-farm payrolls report is +220K. The final Q2 nonfarm productivity rate increased at its strongest pace in 1.5 years, rising to an annualized rate of +3.3% from the preliminary reading of +1.3% reported last month, and well above expectations. Recall that the poor -3.3% final Q1 productivity reading was revised higher to -1.1% with the preliminary Q2 reading out last month.

The reversal of the brief crude rally continues this morning. Yesterday WTI crude settled nearly 8% lower and extended losses post-market after the API report disclosed the biggest inventory build seen in five months. This morning the EIA report also showed substantial inventory growth, erasing an earlier bump higher and putting the front-month contract back below $45. Brent is down 2% to $48.50.

President Obama has secured the backing of 34 US senators for the Iran nuclear deal, giving him enough votes to pass the agreement through Congress. The 34th, pivotal vote belongs to Senator Barbara Mikulski, a Democrat from Maryland. With Mikulski's support, Congress will not have enough votes to override a veto by Obama against a potential Congressional resolution opposing passage of the deal.

On the M&A front, biotech deals are the order of the day. Synergetics agreed to be acquired by Valeant for $6.50/shr in cash - for a total of $166M - and up to $1.00/shr in further milestones. The acquisition is aimed at expanding Valeant's Bausch + Lomb business. Baxalta has reportedly ended negotiations to acquire Ariad. Baxalta had been looking at Ariad as a defense against Shire's unsolicited all-stock takeover bid. Shares of ARIA are down 17.5% on the news.

Looking Ahead

- 14:00 (US) Federal Reserve Beige Book
- 16:00 (BR) Brazil Central Bank (BDB) Interest Rate Decision: Expected to leave Selic Target Rate unchanged at 14.25%
- 17:00 (KR) South Korea Aug Foreign Reserves: No est v $370.8B prior
- 19:00 (KR) South Korea Q2 Final GDP Q/Q: No est v 0.3% prelim; Y/Y: No est v 2.2% prelim
- 21:30 (AU) Australia July Trade Balance: -A$3.1Be v -A$2.9B prior
- 21:30 (AU) Australia July Retail Sales M/M: 0.4%e v 0.7% prior
- 21:35 (JP) Japan Aug PMI Services: No est v 51.2 prior; PMI Composite: No est v 51.5 prior
- 22:15 (SG) Singapore Aug PMI Services: No est v 51.3 prior
- 22:30 (HK) Hong Kong Aug PMI Services: No est v 48.2 prior
- 23:30 (TH) Thailand Aug Consumer Confidence: No est v 73.4 prior; Economic Confidence: No est v 62.6 prior