ISM and Unemployment Claims, China Lockdown, NVIDIA Warning – What Moves the Markets By

Β© Reuters

By Jeffrey Smith – One of China’s largest cities has been shuttered due to the COVID-19 outbreak, sending commodities and stocks down around the world. US stocks are heading for a fifth straight decline, ahead of more data from the labor market and the ISM manufacturing survey. China’s private manufacturers returned to deflation last month. NVIDIA has added to the string of chipmakers’ troubles, and Broadcom announces its earnings after the bell. Here’s what you need to know in the financial markets on Thursday, September 1.

1. China shutdown drives commodity and stock prices lower

Beijing’s COVID Zero policy returned to haunt commodity markets again overnight, as Chengdu – the capital of Sichuan province and home to 21 million people – was put on lockdown.

The news affected the prices of base metals in particular, as they all fell by 2%, while declining by more than 6%. Mining stocks like BHP (LON πŸ™‚ and Rio Tinto (LON πŸ™‚ It also fell sharply in London.

While Chengdu is nothing like Shanghai’s immediate importance to world markets, it is nonetheless an important industrial center. Volvo Cars (ST πŸ™‚ said its factory there will be temporarily closed. Others are likely to follow.

2. US Unemployment Claims, ISM Survey

The flow of US economic data continues thick and fast with the August Challenger Survey due at 07:30 ET, its weekly release at 08:30 ET, and finally the Institute for Supply Management at 10:00 ET.

Data will be released in a market that received its hopes of a quick end to the monetary tightening cycle a series of hits last week, and Cleveland Fed President Loretta Meester’s comments on Wednesday were the latest. Mester specifically on the idea of ​​a first rate cut before 2024.

The Challenger survey is likely to confirm an increase in the pace of layoffs, but the latest jobless claims numbers – and Tuesday’s Labor Department survey, suggest there are still plenty of other jobs around. Initial claims are expected to have risen slightly to 248,000.

The ISM PMI may be more interesting, in what it says about the progress made in overcoming supply chain bottlenecks. Wednesday’s ADP report confirmed that net employment in manufacturing has stalled.

3. Stocks poised to open lower, as hope for Fed pivot fades

US stock markets aren’t even attempting their usual primary market bounce this morning, as news out of China delivers another blow to sentiment about the economy without offering much in the way of lower inflation pressures to offset.

By 06:20 ET, it was down 161 points, or 0.5%, while it was down 0.7%, down 1.1%. Major monetary indicators have fallen for four consecutive days, losing between 0.6% and 0.9% on Wednesday.

Stocks will likely be in focus later, including Bed Bath & Beyond (NASDAQ:), whose recent tough cost-cutting measures have done little to halt selling in shares even after trading hours on Wednesday, and Walt Disney (NYSE:), which The Wall Street Journal reported is planning an Amazon Prime-like membership plan.

Hormel Foods (NYSE πŸ™‚ and Campbell’s soup (NYSE:) posted early gains, while Lululemon (NASDAQ:) rose after the closing bell.

4. NVIDIA warns of a new blow to China sales; Looking at Broadcom’s earnings

Semiconductors are also likely to be in focus after NVIDIA (NASDAQ πŸ™‚ warned of another hit to revenue from US restrictions on AI chip sales to China.

NVIDIA said it will lose $400 million in sales each quarter from a new requirement of it to obtain a license to export some of its products.

The news comes in the middle of a tough week for chipmakers: Korean chipmakers reported their first quarterly drop in shipments three years ago, while unsold chip stocks rose 80% over the year.

All of this forms an interesting background to Broadcom (NASDAQ :)’s quarterly report after the bell

5. Oil dips due to lockdown, Caixin PMI News

Crude oil prices also fell to their lowest level in two weeks on the back of bad news from China, which was not limited to Chengdu. A measure of private sector industrial activity fell into contraction territory last month at 49.5, worse than expected.

This outweighs any short-term support from a sudden drop of 3.3 million barrels last week.

By 06:30 ET, futures were down 2.3% at $87.52 a barrel, while they were down 2.4% at $93.39 a barrel.

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