Breaking: Private sector employment rises by 132,000 in August vs 288,000 expected

The data published by Automatic Data Processing (ADP) showed on Wednesday that private sector employment in the US rose by 132,000 in August. This reading came in weaker than the market expectation for an increase of 288,000.

Commenting on the report, “our data suggests a shift toward a more conservative pace of hiring, possibly as companies try to decipher the economy's conflicting signals,” said Nela Richardson, chief economist, ADP. “We could be at an inflection point, from super-charged job gains to something more normal.”

Market reaction

With the initial market reaction, the US Dollar Index edged lower and was last seen trading flat on the day at 108.85.

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Eurozone Economy Grew 0.2% in 1Q; France Stagnates, Germany Avoids Recession

The Eurozone economy grew by 0.2% in the first three months of the year, but its post-pandemic growth weakened sharply toward the end of the period under pressure from the war in Ukraine and record-high inflation.

Eurostat's figures, released on Friday, mean that gross domestic product was up 5.0% from a year earlier, a time when the region's economy was still laboring under the worst of the effects from the pandemic. 

Both figures were largely in line with expectations, but masked some big divergences from consensus among some of the region's biggest member states. French GDP undershot expectations to stagnate in the quarter, while German GDP rose 0.2%, defying fears that it would register a second straight quarter of negative growth, thanks to strong investment spending.

At the same time, Eurostat said that inflation in the Eurozone hit a new record high since the creation of the single currency. Consumer prices rose 7.5% in April, up from 7.4% in March. While the slower rise in the headline rate suggests that an absolute peak for inflation may be near, underlying price pressures remained strong: core CPI rose by over 1% for the second month running, and Eurostat's harmonized measure of annual inflation excluding food and energy accelerated far more than forecast to 3.9% from 3.2% last month.

The euro rose by around half a cent against the dollar in the course of the morning as national GDP data were published in advance of the Eurozone numbers. By 5:20 AM ET (0920 GMT), it was at $1.0576, up 0.8% on the day. A bounce in Chinese assets in response to promises of more economic policy support from Beijing had also helped sentiment toward the euro and to risk assets more broadly.

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 European Stocks Lower; More Russian Sanctions, Aggressive Fed Weigh

European stock markets traded lower Wednesday, weighed by the likely imposition of new Western sanctions on Russia as well as concerns of aggressive monetary tightening by the U.S. Federal Reserve.

By 3:40 AM ET (0740 GMT), the DAX in Germany traded 0.5% lower, the CAC 40 in France fell 0.5% while U.K.’s FTSE 100 dropped 0.1%.

The United States and Europe are set to announce later Wednesday new sanctions to punish Moscow over alleged atrocities in Ukraine, something Ukraine President Volodymyr Zelensky described as "war crimes" in a speech to the United Nations security council.

The European Commission has already proposed new sanctions including banning Russian coal imports and halting trade worth nearly 20 billion euros ($22 billion), and the White House said late Tuesday that its new measures will target Russian banks and officials and ban investment in Russia.

Russia’s invasion of Ukraine and the sanctions already levied by the West as punishment have roiled markets, causing sharp rises in commodity prices, prompting fears of sharply slower growth this year. 

German factory orders fell 2.2% on the month in February in the runup to Russia’s invasion of Ukraine, falling for the first time in four months and underscoring concerns over weaker growth in Europe’s largest economy. 

Also, dragging on the European markets are set to receive a negative handover from Asia and Wall Street after comments from Fed Governor Lael Brainard raised expectations of aggressive interest rate rises by the U.S. central bank, added to by hawkish comments from Fed Governor Lael Brainard, normally seen as one of the more dovish members of the central bank policymakers.

This puts the focus firmly on the release later Wednesday of minutes from the Fed's last policy meeting, with investors looking for clues over the likelihood of a 50 basis point hike at the U.S. central bank's next meeting in May.

In corporate news, Volkswagen (DE:VOWG_p) stock fell 2.7% after the German carmaker’s finance chief Arno Antlitz told the Financial Times that the company is likely to ditch many models by the end of the decade to concentrate on producing fewer cars overall but more profitable premium vehicles.

Vestas Wind Systems (CSE:VWS) stock fell 1.4% after the Danish wind turbine said that it would withdraw from Russia, where the firm has two factories.

Oil prices edged higher Wednesday, with traders having to balance supply concerns on the back of likely new sanctions on Russia with fears of weaker demand after a build in U.S. crude inventories and a prolonged COVID lockdown in Shanghai, the Chinese financial hub.

U.S. crude oil supply data from the industry body American Petroleum Institute, released late Tuesday, showed a build of just over 1 million barrels for last week, compared with the 3-million-barrel draw reported the previous week.

Investors now await official numbers from the U.S. Energy Information Administration later in the session for confirmation.

By 3:40 AM ET, U.S. crude futures traded 0.9% higher at $102.86 a barrel, while the Brent contract rose 1% to $107.67. 

Additionally, gold futures fell 0.4% to $1,919.50/oz, while EUR/USD traded 0.1% lower at 1.0891.

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 Oil rises to $105 as supply fears perist despite reserves release

LONDON (Reuters) -Oil rose to $105 a barrel on Monday in volatile trade as the release of strategic reserves by consuming nations failed to eliminate supply fears arising from Russia's invasion of Ukraine and the lack of an Iranian nuclear deal.

The invasion in February heightened supply concerns that were already underpinning prices. Sanctions imposed on Russia and buyers' avoidance of Russian oil have already led to a drop in output and raised fears of larger losses. [IEA/M]

"Will the release of barrels from strategic reserves fill a shortfall caused by sanctions and buyer aversion to Russian oil? In a word, no," said Stephen Brennock of oil broker PVM.

Brent crude was up 92 cents, or 0.9%, at $105.31 a barrel by 1140 GMT. U.S. West Texas Intermediate crude gained 63 cents, or 0.6%, to $99.90. Both contracts were down more than $1 earlier in the session.

Crude dropped by about 13% last week after U.S. President Joe Biden announced a record U.S. oil reserves release and as International Energy Agency members committed to further tapping reserves. Crude had hit $139 last month, its highest since 2008.

"The massive release of 1 million barrels per day over a period of six months in the United States alone is likely to ensure that the oil market is no longer acutely undersupplied in the second and third quarters," Commerzbank (DE:CBKG)'s Carsten Fritsch wrote in a report.

Oil also gained support from a pause in talks to revive the Iran nuclear deal, which would allow a lifting of sanctions on Iranian oil. Iran on Monday blamed the United States for the halt.

Downward pressure came from a truce in Yemen, which could ease threats to supply in the Middle East.

The United Nations has brokered a two-month truce between a Saudi-led coalition and the Houthi group aligned with Iran for the first time in the seven-year conflict. Saudi oil facilities have come under Houthi attack during the fighting.

WTI falls back under $100 with Russo-Ukraine peace talk optimism, crude oil reserve releases in focus

Oil was trading with a bearish bias on Friday amid Russo-Ukraine peace talk optimism and crude oil reserve release focus. 

WTI dipped below $100 per barrel and hit fresh weekly lows sub-$98.00, with bears eyeing March lows in the $93.00s.

Oil prices have continued to trade with a bearish bias on Friday, with front-month WTI futures dipping to fresh weekly lows under $98.00 as traders digest the recent announcement of a major crude oil reserve release in the US (1M barrels per day for six months) and a further tightening of lockdown measures in major Chinese economic zone Shanghai. Recent positive commentary from Russian Foreign Minister Sergey Lavrov regarding progress in Russo-Ukraine peace talks is also weighing on oil as geopolitical risk premia is further unwound. Having found resistance at its 21-Day Moving Average (DMA) in the $108 area earlier in the week, WTI is now probing its 50DMA to the downside in $98.00s.

International Energy Agency member nations recently commenced a meeting and the speculation is that other major oil consumer nations might also announce crude oil reserve releases alongside the US. US President Joe Biden said this could amount to a further 30-50M barrels of immediate supply. If confirmed, further newsflow pertaining to crude oil reserve releases could inject further bearishness into crude oil markets, with a test of March lows in the $93.00s on the cards.

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