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Here Is Why Stock Futures Are Trading Lower


2 September 2021

Stock futures in the United States and Europe are trading lower today, following the release of ADP’s job report yesterday. According to the data, the labour market recovery in the United States is taking longer than expected. As a result, investor sentiment was mixed in yesterday’s session, with the Nasdaq and S&P 500 rising while the Dow fell. It is worth noting that Nasdaq, the tech-savvy index, closed yesterday’s session at an all-time high as investors shifted to defensive stocks.

Stock Market

Broadly speaking, the American and European markets started September on a positive note, keeping in mind that the steep global economic recovery may have already peaked. Likewise, investors are also aware that central banks are considering gradually taking away their monetary support in 2021.

The positive move in stock markets emerged because of dull economic reports that were released on Wednesday. For instance, the ADP data hinted that employers only supplemented 374,000 jobs in August, compared to an estimated 618,000. Investors are considering bad news as good because the economy not recovering quickly may convince the fed to stick to its soft monetary stance.

A similar situation can be found in China. According to Caixin’s manufacturing purchasing managers’ index, the industry is contracting for the first time since April 2020. Because of the index’s drop, investors are questioning whether the country’s central bank will provide further support to boost economic growth.

Investors should bear in mind that the Labor Department’s unemployment claims data is due today. Moreover, FOMC members Bostic and Daly are expected to speak today as well. Stock traders are keenly watching them in order to understand and predict how the central bank will respond to the poor economic statistics and when it will start its controversial tapering of bond purchases.

Cryptocurrencies

With each passing day, more and more people and companies are showing interest in the blockchain space. This belief is supported by the fact that venture funding in this industry is at an all-time high. Prior to June, $17 billion had been invested in the crypto business, compared to $7.4 billion in 2018. This is a truly incredible accomplishment. Big corporations have also become key players in the market and are working on ways to let their consumers get in on the action.

The scenario of Alpaca and Offchain Labs receiving $170 million in funding can serve as an example of how the funds are being utilised. The funds will be used to improve Arbitrum, the technology that underpins its main net, Arbitrum One, through additional research and development. It also intends to grow its business by hiring more employees.

Oil

OPEC+ has agreed to stick to its initial plan of enhancing its oil supply by 400,000 barrels per day per month, gradually eliminating its unprecedented supply reductions caused by the coronavirus pandemic. However, it is worth noting that the cartel has raised its demand forecast for 2022 and is under pressure from the Biden administration to ramp up production. The group is working diligently to reduce excess oil supply while aiming to avoid market volatility.

Crude oil inventories in the United States have settled at 425.4 million barrels, falling nearly 7.2 million barrels from last week. The expected drop in stockpiles was merely 3.1 million barrels. Oil prices are likely to remain under pressure until refineries affected by tropical storm Ida return to full operational capacity.

Gold

Over the last few days, the fluctuation in the dollar index has been a leading factor influencing gold prices. Following the release of a subpar employment report by ADP, the dollar fell against a specific basket of currencies. The precious metal rose initially in response to the news but quickly fell back due to the strength seen in the manufacturing sector. Changes in the dollar index affect gold prices because they make the precious metal more or less expensive for those working with foreign currencies.

Moving forward, gold prices are likely to be under pressure due to a strong non-farm payrolls report expected on Friday. Economists estimate that the economy has gained 750,000 new jobs.

Asian Markets

Stock markets in Hong Kong are on the rise as investors have started to invest in Chinese tech companies. Stock traders believe that Beijing’s imposition of regulatory restrictions has peaked. Furthermore, with the economic recovery slowing down, investors are wondering whether Beijing will raise its monetary support to help small-scale businesses grow.

As of 11:20 p.m. EST, the Nikkei rose 0.09%, and the Shanghai Composite Index was up 0.39%. The ASX 200 index dropped 1.00%, and Seoul’s Kospi declined 0.92%. The Hang Seng index, in Hong Kong, has jumped 0.29%.

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