Market Update

On Thursday, the US released its services PMI data, which showed a slight increase to 51.5 in August, up from 51.4 in July. This modest uptick, surpassing market expectations, indicates that the services sector is still expanding and reflects stability across the industry. A closer look at the data revealed moderate growth across various sectors, although ongoing price pressures and high interest rates continue to weigh on business performance and dampen demand.
Fed Chair Jerome Powell recently emphasized that the Federal Reserve is not keen on further weakening in the labor market. While traders are largely expecting a rate cut by the Fed in September, there is growing speculation over whether the central bank might opt for a 50 basis point reduction rather than a more modest 25 basis point cut. After a significant downward revision of 89,000 jobs added in July, Friday’s non-farm payrolls report revealed that the labor market is cooling, with only 142,000 jobs added in August—far below the expected 200,000. Additionally, the JOLTS report on Wednesday highlighted a drop in job openings to 7.67 million, the lowest since January 2021, contributing to a reduction in the job-to-applicant ratio to below 1:1.
However, before traders assume that this data points to a larger rate cut, it is important to note that unemployment fell to 4.2% in August, down from 4.3% in July. This suggests that while the labor market is cooling, it is not weakening dramatically and appears to be slowing at a controlled pace. Moreover, solid wage growth reported for August should continue to support consumer spending, helping to prevent a stagnation in growth that could challenge policymakers in achieving their 'soft landing' goals.
Although the data does not suggest a looming recession in the US, the weaker-than-expected jobs report caused some caution among investors, with the S&P 500 closing the week down by about 4%.
In a move to stabilize oil prices, OPEC+ announced on Thursday that it would delay a planned oil output increase for October and November. The decision follows a drop in crude oil prices to a nine-month low, driven by weaker demand forecasts from China, the world’s largest oil importer. The group extended its voluntary production cuts of 2.2 million barrels per day through at least the end of November in an attempt to stabilize prices.
In France, President Emmanuel Macron appointed Michel Barnier as Prime Minister in an effort to break the country’s political deadlock. Barnier faces the tough task of advancing the 2025 budget and implementing reforms in a divided parliament. While he has secured conditional support from the National Rally, they have warned that they may withdraw their backing if issues such as immigration are not addressed to their satisfaction. This dynamic increases the National Rally’s influence over Barnier and makes him reliant on their political demands.
Meanwhile, in Ireland, the unemployment rate, which had reached a 28-month high of 4.7% in July, dropped to 4.3% in August, according to data released on Wednesday.