Wall Street Breakfast: Nonfarm Payrolls Take Center Stage

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The U.S. jobs report will be the big headline this morning, yielding clues about the health of the world’s largest economy and upcoming policy decisions. Economists expect 160,000 jobs were added during August, after advancing 164,000 in July, while the unemployment rate likely remained unchanged at 3.7% for a third straight month. The gains would be below the monthly average of 165,000 over the last seven months, but still way above the roughly 100,000 per month needed to keep up with growth in the working age population. U.S. stock index futures are up 0.3% ahead of the data, holding on to this week’s big advance.

Powell talks policy

With the FOMC’s next policy meeting just two weeks away, investors are keeping an eye on the next appearance of Jerome Powell. The Fed Chair participates today in “the economic outlook and monetary policy” panel discussion at the Swiss Institute of International Studies. The idea of an aggressive half-point reduction hasn’t yet gained much support inside the central bank, according to interviews with officials and their public speeches, which suggest to a quarter-percentage point cut as the most likely option.

Housing finance overhaul

The Trump administration has released a formal plan to return Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC), which back more than half of U.S. home mortgages, to private hands after more than 11 years in government conservatorship. It represents a major reversal from promises long held by leaders of both political parties to abolish the companies, and would mark an important win for investors who have been betting politicians would not follow through on those promises.
Go deeper: Key data on Fannie Mae.

PBOC cuts RRR

Looking to further stimulate the economy, the People’s Bank of China is reducing the amount of funds banks have to hold in reserve as the trade war drags on. Effective Sept. 16, the reserve requirement ratio will be cut by 50 basis points, and further reduced by 100 bps for some qualified banks. The move was the third action of its kind this year and the seventh since early 2008, releasing another 900B yuan ($126.35B) of liquidity into the world’s second-largest economy.

First to downgrade Hong Kong

Following months of protests, Fitch has become the first ratings agency to downgrade Hong Kong as an issuer of long-term, foreign currency debt, lowering its ranking from AA+ to AA with a negative outlook. The decision had little impact on the city’s financial markets, with the Hang Seng Index closing 0.7% higher and the local dollar little changed. The Asian financial hub is bracing for more demonstrations this weekend, with protesters threatening to disrupt transport links to the airport, after city leader Carrie Lam failed to appease some activists with the withdrawal of a controversial extradition bill.
Go deeper: Holdings of the iShares MSCI Hong Kong ETF (NYSEARCA:EWH).

Delay Brexit?

“I’d rather be dead in a ditch,” declared British Prime Minister Boris Johnson as opposition parties hope to force him to seek another delay at an EU summit on Oct. 17. The pound, meanwhile, slipped overnight after the high court in London ruled that Johnson’s move to suspend parliament was legal, days after a Scottish court turned down a similar legal challenge. The ruling will go to appeal at the supreme court, which has already announced it is prepared to hear the case on Sept. 17.

Facebook launches Dating in U.S.

“Finding a romantic partner is deeply personal, which is why we built Dating to be safe, inclusive and opt-in,” the company announced at a live event on Thursday. While the experience is centered on Facebook (NASDAQ:FB), users can connect Instagram accounts to show Instagram stories on their dating profile and connect with their followers there. The news weighed on shares of Match Group (NASDAQ:MTCH) and IAC/InterActiveCorp (NASDAQ:IAC), which both closed the session down more than 4%.

Luxury push

Alibaba (NYSE:BABA) has agreed to buy e-commerce business Kaola from Chinese gaming company NetEase (NASDAQ:NTES) for $2B, adding a platform that specializes in supplying curated luxury goods from abroad to domestic consumers. Tmall Global and Kaola will result in a massive market presence in the cross-border e-commerce sector. Alibaba, which is also looking for new revenue drivers, will invest $700M for a minority stake in NetEase’s music streaming arm as it takes on Chinese market leader Tencent Music (NYSE:TME).
Go deeper: Options prices for Alibaba shares.

Fight over vehicle emissions

The EPA and NHTSA are reportedly preparing to submit for final review a plan to revoke California’s authority to set its own vehicle emissions standards and declare that states are pre-empted from setting their own rules. In July, four automakers – Ford (NYSE:F), Volkswagen (OTCPK:VWAGY), BMW (OTCPK:BMWYY) and Honda (NYSE:HMC) – said they had reached a voluntary agreement with the state that would enforce stricter Obama-era emissions standards, after the Trump administration proposed rolling back the federal rules. Other automakers, including GM (NYSE:GM) and Toyota (NYSE:TM), declined to back the deal.

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