Morning Wrap: Can NFP Confirm Waller’s Dovish Turn?

📈 Stock Market

• Yesterday's session on Wall Street ended very successfully, confirmed by clear gains in key benchmarks: the flagship S&P 500 index rose by 1%, the Dow Jones gained about 1.2%, while the tech-heavy Nasdaq performed best, surging 1.4%.

• Elon Musk's empire also recorded a highly successful session, with Tesla shares rising by nearly 5.5% and SpaceX gaining close to 6.5%.

• Gains extended to tech giants, including Microsoft and Meta, which gained 2.7% and 3%, respectively.

• Asian stock markets are gaining clearly on Friday, with tech companies performing particularly well in response to declining expectations of a September Fed rate hike.

• The improvement in sentiment across Asian markets followed dovish comments by Christopher Waller, which caused the probability of a rate hike to drop from around 63% to 50%.

• At the time of writing this briefing, Asian indices are growing at a significant pace: the Kospi is up by about 2.5%, Japan's Nikkei is gaining close to 1.5%, and China's Hang Seng is posting a gain of around 2%.

• Investors in Asia remain cautious, however, awaiting today's NFP report, which could once again impact expectations regarding Fed policy.

🏛️ Macroeconomics and Monetary Policy

• The primary fuel for Wall Street's gains was a speech by Christopher Waller, which was perceived by the market as distinctly dovish.

• Waller assesses that the latest data shows clearer signs of easing inflationary pressure, which increases his comfort level regarding future Fed policy.

• The Fed official noted that upcoming inflation readings will be crucial – if they bring no negative surprises, Waller leans toward keeping interest rates unchanged in September, while remaining open to altering his stance should inflation prove higher than expected.

• Investor focus today centers on US labor market data, where the latest NFP reading (change in US non-farm payrolls) will be released at 14:30

• The RBNZ raised interest rates by 25 bps to 2.75%, although the bank's statement suggested a more cautious approach to subsequent hawkish moves.

• The RBNZ's latest forecasts were interpreted as a signal that the next rate hike is more likely in December than in October.

• Market pricing currently indicates only about a 30% chance of an RBNZ move in October, whereas a full rate hike is already fully priced in by December.

• Household spending in Japan fell by 3.6% YoY in July, exceeding the expected decline of 1.6%.

• The reading recorded in Japan represents the largest decline since January 2024 and marks the eighth consecutive month in which consumption has contracted.

• Data from Japan confirms that rising living costs continue to weigh heavily on consumers, serving as a significant argument for the Bank of Japan when making decisions on further interest rate hikes.

🕊️ Geopolitics

• JD Vance stated that the US does not intend to hold talks with Iran until Tehran ceases attacks on commercial shipping in the Strait of Hormuz.

• Washington emphasizes using all available means to maintain the flow of oil and gas through the strait, while avoiding setting a firm deadline for the conclusion of operations.

• Vance conceded that the timing of when Iran will stop attacking ships remains unknown, warning that further escalation could impact global energy markets.

• According to the US administration, US pressure is taking an increasing toll on the Iranian economy, with sanctions and the oil export blockade restricting Tehran's access to currencies and key commodities.

• Daily loadings of Iranian crude have fallen drastically from around 1.7 million to a mere 260 thousand barrels.

• Donald Trump suggests that renewed military actions should not last long, although at present there is no breakthrough in US-Iran relations.

👑 Commodities and Precious Metals

• A cautious session prevails in the precious metals market ahead of the NFP report publication.

• Gold is trading slightly in the red, hovering around the $4,470 per ounce level.

• Silver is under heavier selling pressure, recording a drop of about 0.6% to the level of $66.5.

🪙 Cryptoassets

• The cryptoasset market opens Friday's session in a cooler mood.

• Bitcoin is down by about 0.8%, bringing its valuation to a test of the $81,000 level.

• Ethereum trades slightly in the red, maintaining quotes around the $2,500 level.