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U.S. Initial Jobless Claims

ADP Employment Report

U.S. employers in August unveiled the greatest number of layoffs in five months, led by cuts in the technology sector, amid a cloudy outlook for growth and ongoing cost concerns, a monthly tally of workforce reduction announcements showed on Thursday.

Firms announced 75,891 layoffs last month, roughly triple the number in July and the largest month-to-month increase in a year, outplacement firm Challenger, Gray and Christmas said. Still, announced staff reductions are down 3.7% year to date.

"August's surge in job cuts reflects growing economic uncertainty and shifting market dynamics. Companies are facing a variety of pressures, from rising operational costs to concerns about a potential economic slowdown, leading them to make tough decisions about workforce management," Challenger Vice President Andrew Challenger said in a statement.

The data comes amid growing concern about the job market as recent government reports have shown increases in the unemployment rate and in the number of layoffs in July. The softening tone to employment data has caught the eyes of Federal Reserve policymakers, who are now expected to kick off interest rate cuts this month to protect the job market from a rapid deterioration.

More than half of August's cut announcements were in the tech sector, totaling 39,563, up sharply from around 6,000 in July and the most since January 2023. The health sector had the next largest announced layoffs at 6,158.

Source: Theedgemarkets

Japanese Prime Minister Fumio Kishida makes a whirlwind visit to South Korea on Friday, seeking to seal a newfound partnership between the neighbours which will be tested by imminent changes of leaders in Tokyo and Washington.

Prodded by US President Joe Biden, Kishida and South Korean President Yoon Suk Yeol orchestrated an about-face in ties that had sunk to their lowest level in decades, amid acrimonious diplomatic and trade disputes over Japan's occupation of Korea from 1910 to 1945.

The leaders will review progress on their efforts to step up cooperation between the countries and discuss ways to deepen their partnership, according to Yoon's office.

Kishida has announced that he would step down in September and Japan's ruling Liberal Democratic Party will hold elections on Sept 27 to choose his successor.

Yoon and Kishida will hold a summit meeting on Friday afternoon. Kishida is expected to return to Tokyo on Saturday.

On his farewell visit, Kishida will seek to push the ties forward, broadening the relationship to partners working closely together on the international stage, a Japanese foreign ministry official told a briefing.

Their meeting will also be watched for any outcome of ongoing discussions between the two countries on evacuating each others' citizens from an emergency in a third country, and expediting border checks for travellers.

Yoon has made it a diplomatic priority to mend ties with Japan and improve security cooperation to tackle North Korea's military threats.

At a summit with Biden at Camp David last year, the three leaders committed to deepen military and economic co-operation, agreeing to initiatives explicitly designed to prompt long-term partnership, a senior US official said.

The United States is confident Kishida's successor will be as committed to continuing the renewed alliance and that "all of these projects we've been working on together are going to continue at pace under new leadership," Mira Rapp-Hooper, senior official at the White House National Security Council, said.

"Both Prime Minister Kishida and President Yoon took on a great deal of personal risk and political risk to move forward the warming of their bilateral ties in ways that prior governments just hadn't been able to accomplish," she said.

Despite the public expression of lasting partnership from the three capitals, there is lingering question whether the Asian neighbours can maintain the kind of genuine rapprochement that will put their historic woes behind with new leaders in place.

"Even if a country's foreign policy is dictated by its national interests and its values, the changes of government bring changes at least in the tones and approaches of foreign policy," said Kim Hyoung-zhin, former South Korean deputy foreign minister recently studying in Japan.

Kishida is likely to be met by protesters in Seoul, who say Tokyo has not done enough to atone for its wartime past.

Source: Theedgemarkets

Energy – OPEC+ delays supply increase

It was no surprise given the recent pressure on the oil market that OPEC+ members yesterday decided to delay plans to phase out their additional voluntary cuts. Members were set to bring 180k b/d of supply onto the market in October and a similar amount in November. Instead, plans to increase supply have been pushed back by two months. Therefore members are now scheduled to gradually bring back 2.2m b/d from December 2024 through until November 2025.

Markets appear to be underwhelmed with the move. ICE Brent settled basically flat yesterday. Clearly sentiment is still negative given worries over demand. OPEC+ is likely hoping that sentiment turns more positive over the course of the next two months, allowing them to start bringing supply back to the market. However, the issue is that the oil balance is in surplus over 2025, suggesting that prices are likely to remain under pressure without OPEC+ taking longer term action. There could also be an element where OPEC+ is waiting for the outcome of the US election. A Trump victory could mean that the US takes a more hawkish view against Iran once again and so stricter enforcement of oil sanctions. This could potentially see as much as 1.3m b/d of Iranian supply impacted, which would allow other OPEC+ members to unwind their additional voluntary cuts.

Yesterday’s delayed EIA inventory report was fairly constructive. US commercial crude oil inventories fell by 6.87m barrels over the last week, while crude stocks in Cushing declined by 1.14m barrels. The draw was largely driven by lower crude imports, which fell 768k b/d WoW. Refined product stock changes were less supportive. Gasoline inventories increased by 848k barrels driven by weaker demand, as we move towards the end of the driving season. Implied gasoline demand fell by 369k b/d over the week. Meanwhile, distillate stocks dropped by 371k barrels.

In the US, Henry Hub natural gas rallied by a little more than 5% yesterday after US natural gas storage increased less than expected. EIA weekly data shows that US gas storage increased by 13Bcf last week, which was less than the 27Bcf increase the market was expecting and also well below the 5-year average increase of 51Bcf. Total gas storage is still 6.6% higher than year-ago levels and also 10.7% above the 5-year average. However, the gap has been narrowing over much of the injection season.

Metals – Iron ore tumbles on demand worries

Iron ore fell for a fourth consecutive session yesterday to trade just above $90/t, its lowest level since 2022. Iron ore is one of the worst-performing commodities so far this year with prices now down about 33% year-to-date as the outlook for steel demand in China continues to deteriorate. Iron ore is among the most vulnerable to China slowdown risks with China’s property market constituting the bulk of steel demand. Looking ahead to the rest of the year, fundamentals are still pointing to the downside for iron ore.

Meanwhile, iron ore port holdings in China continue to rise, back above 150 million tonnes and standing at its highest ever for the time of year, in a sign of abundant seaborne supplies. We expect iron ore prices to fall further this year amid subdued demand and sufficient supply. Downside risks are likely to prevail in the near term amid subdued steel demand.