US futures
Dow futures -0.71%, S&P futures -1% & Nasdaq futures -1.5%
In Europe
FTSE -0.37% & -DAX -1.5%
- September is a weak month for stocks
- Fed rate cut expectations rise
- GBP/USD plunges 1.4% on fiscal worries
- Oil rises ahead of the OPEC+ meeting
September is often a weak month for equities
US stocks are falling sharply on the 1st trading day in September after the long Labor Day weekend.
September is typically a weak month for US equities, and trading has started in that manner amid concerns over the legality of Trump's tariffs and ahead of a key week for economic reports.
The US appeals court ruled on Friday that most of Trump’s trade tariffs are illegal. The tariffs can remain in place until October 14th, giving the Trump administration time to file an appeal with the Supreme Court, which Trump will move ahead with.
Should the tariffs be deemed illegal, the government will need to pay back all the money, incur more debt, experience higher yields, and additional market troubles.
In the US, treasury yields are rising across the curve, with the 10-year and 30-year yields at the highest level in over a month, weighing on equities.
Meanwhile, the market is pricing in a 92% chance of a 25 basis point rate cut in the September meeting. Higher rate cut expectations came after July's weak job report and following Powell’s acknowledgement of growing risks to the US jobs market in the Jackson Hole symposium. Attention will therefore be more on Friday's nonfarm payroll report.
Today, US ISM manufacturing PMI data is expected to be released and show that the contraction in the sector has slowed.
Corporate news
PepsiCo is rising almost 6% after activist investor Elliott Management announced a $4 billion stake in the company, creating an opportunity for a turnaround of the company in order to restore momentum.
Kraft Heinz confirmed reports that it would split into two publicly traded companies through a tax-free spinoff. The share price is little changed on the news.
Constellation Brands is tumbling 8% after the Brewer cut full-year guidance to come between $10.77 and $11.07 per share, down from prior guidance.
Nasdaq 100 forecast – technical analysis
The Nasdaq 100 is testing the lower band of the rising channel and the 50 SMA as the price approaches 23k. The bearish engulfing candle combined with the RSI below 50 keeps sellers hopeul of further declines.A break below 23k opens the door to 22,665, the August low, creating a lower low. Should the 50 SMA and trendline resistance hold buyers will look to recover above 23,500 towards 24k.
FX markets – USD rises, GBP/USD falls
The USD is rising, recovering from a five-week low, due to safe haven demand amid a steep sell-off in sterling and the euro as bond yields surge.
The EUR/USD is falling. Is there 0.8% as German and French bond yields rise to multi-year highs and concerns over increasing debt levels. Concerns surrounding the French budget and vote of no confidence next week sparked a sell-off in French bonds last week, which has spilled over to similar declines in German and Dutch government bonds, with yields trading at 14-year highs. Meanwhile, eurozone inflation ticked higher to 2.1% up from 2% remaining close to the ECB's 2% target.
The GBP/USD is falling over 1.4% to a 4-week low, as UK borrowing costs rose to the highest level since 1998 amid growing investor anxiety around the UK's ability to keep finances under control. The pound is on track for its largest one-day fall since 2023 amid worries over the labour market's ability to exercise fiscal restraint.
Oil rises ahead of OPEC+ meeting
Oil prices are all rising, up 1.6% so far this week, ahead of an OPEC+ meeting on Sunday, and amid mounting expectations that the escalation in the Russian Ukraine war could disrupt supply
Investors will be monitoring the OPEC meeting on September 7. The group is not expected to unwind the remaining voluntary cuts. OPEC+ is likely to wait for more data following the conclusion of the US summer driving season before making the next move.
Meanwhile, Ukraine drone attacks have shut down facilities accounting for around 17% of Russia's oil processing capacity or 1.1 million barrels per day, raising concerns over supply.
