By Mike Dolan
LONDON (Reuters) – What matters in U.S. and global markets today
By Mike Dolan, Editor-At-Large, Finance and Markets
Whatever the market take was from Friday’s surprisingly soft U.S. payrolls update has been overshadowed by the instant firing of the statistician responsible for them – leaving more questions than answers about the veracity of these numbers and all those in the future.
The massive downward revisions to prior months’ job totals were a bigger initial jolt than the slight miss to July payrolls or the uptick in the unemployment rate. But President Donald Trump’s dismissal of Bureau of Labor Statistics boss Erika McEntarfer over what he called “rigged” data means investors now either dismiss the July report or assume future reports will be massaged to be more favorable to Trump.
* Trump’s firing of McEntarfer has prompted investors to revisit April’s questions about damage to U.S. transparency and institutional integrity – qualities that, for many, have been at the heart of America’s long-standing exceptional economic and financial performance. The early resignation of Federal Reserve Board Governor Adriana Kugler, also on Friday, now gives Trump the chance to put a third nominee on the seven-person Fed board – increasing his influence on the central bank while he is demanding steep interest rate cuts.
* The jobs data release on Friday has prompted market futures to price an 85% chance of a Fed cut next month – compared to less than 50% beforehand – and more than fully price two cuts by year’s end. U.S. Treasury yields plunged to their lowest in over a month. Ten-year yields clocked the biggest one-day fall of the year and the 2-30-year yield curve widened to its steepest in over three years. The dollar swooned, giving back a chunk of last month’s rally. Most of these moves were pared back slightly first thing on Monday.
* U.S. stocks ended down more than 1% on Friday, having already been jarred by the August 1 tariff announcements, and the VIX ‘fear index’ jumped above 20 for the first time since June – likely reflecting unexpected jobs market weakness and a duff earnings outlook from Amazon. Futures were back up more than 0.5% ahead of Monday’s bell as another heavy week of earnings beckons and Palantir tops Monday’s diary. With two-thirds of the S&P 500 having reported Q2 updates, the blended annual profit growth rate for the 500 firms is running at 11% – almost twice estimates one month ago and back roughly to where expectations were on January 1.
