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Futures edge up, JOLTS data ahead, FTX fraud trial begins - what's moving markets

Published Oct 03, 2023 05:24
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Please name your holdings portfolio -- U.S. stock futures point into the green, as traders look ahead to fresh job openings data out of the world's largest economy. Elsewhere, Sam Bankman-Fried's closely-watched fraud trial is scheduled to begin on Tuesday, with the former FTX cryptocurrency exchange boss possibly facing a hefty prison sentence, while shares in embattled property group China Evergrande Group (HK:3333) surge after trading resumes in Hong Kong following a recent suspension.

1. Futures inch higher

U.S. stock futures edged up on Tuesday after the main indices on Wall Street were mixed in the previous session to kick off both a new month and fresh quarter.

At 04:58 ET (08:58 GMT), the Dow futures contract had added 51 points or 0.2%, S&P 500 futures rose by 8 points or 0.2%, and Nasdaq 100 futures gained 26 points or 0.2%.

On Monday, the 30-stock Dow Jones Industrial Average shed 0.2%, while the tech-heavy Nasdaq Composite added 0.7% and the benchmark S&P 500 edged only marginally higher. All three ended September and the third quarter lower.

Pressuring equities was the 10-year U.S. Treasury yield, which jumped to its highest level since 2007 after data showed that American factory activity contracted by its smallest amount in about a year. Yields typically increase as prices fall.

The numbers pointed to resilience in the U.S. economy, supporting some predictions that the Federal Reserve could choose to keep interest rates higher for a longer period of time. A hawkish stance from the Fed last week has persuaded many investors to recalibrate their rate expectations, with futures markets now betting that borrowing costs will stand at 4.7% by the end of next year -- implying fewer cuts than previously anticipated from the current range of 5.25% to 5.50%.

2. Job openings data ahead

On the economic data front on Tuesday, traders will have the chance to pour through the Job Openings and Labor Turnover Survey for August.

The so-called JOLTS report is expected to show that job openings dropped to 8.8 million in August. In the prior month, the figure slipped to its lowest mark in almost 2-1/2 years, hinting at a gradual slowing in the labor market that helped bolster the argument for the Fed to leave interest rates unchanged at its September meeting.

Job quitting also decelerated to its slowest pace since early 2021, which analysts took as a sign that workers were becoming less confident that they can leave their current positions for new and potentially higher-paying opportunities. Economists have said that a decrease in job-hopping may alleviate some upward pressure on inflation, which has been the central target of the Fed's recent campaign of rate hikes.

Yet labor conditions were still tight, with 1.51 job vacancies available for every unemployed person in July. Although this was down from 1.54 in June, it remained above the 1.0-1.2 range widely considered to be necessary for the labor market to not create too much inflation.

3. Sam Bankman-Fried's fraud trial to begin

The fraud trial of Sam Bankman-Fried is scheduled to begin with jury selection on Tuesday, as the disgraced cryptocurrency tycoon faces criminal charges that come with a combined prison sentence of more than a century.

Bankman-Fried, who is currently being jailed in Brooklyn, stands accused of stealing billions of dollars in customer deposits through his FTX crypto exchange to account for losses at his hedge fund, Alameda Research. The former billionaire has pleaded not guilty to seven counts of fraud and conspiracy.

He is expected to say that his actions at FTX were solely mistakes that lacked criminal intent. FTX, which is now bankrupt, collapsed in November 2022 in a failure that uncovered up to $9 billion in missing customer funds.

Bankman-Fried's argument will likely be challenged by his former colleagues, including ex-Alameda chief and his one-time love interest Caroline Ellison. She, along with former FTX executives Gary Wang and Nishad Singh, have all pleaded guilty and are set to testify against him.

4. Evergrande shares surge after Hong Kong trading resumes

Shares in China Evergrande Group jumped by as much as 42% on Tuesday after the heavily-indebted property developer's stock resumed trading in Hong Kong.

The group, which has become a poster child of a debt crisis rocking China's key real estate sector, had seen trading of its shares suspended last Thursday following media reports that Chairman Hui Ka Yan was under police surveillance. Evergrande later said that Hui was the subject of an investigation over unspecified crimes.

This week, the Wall Street Journal has reported that he is being investigated on suspicion of transferring assets offshore while Evergrande was struggling to complete unfinished projects. On Monday, Evergrande said that there is "no other inside information in relation to the company that needs to be disclosed."

The group had previously said that an official probe had prevented it from issuing new debt, effectively quashing a planned restructuring of its liabilities with international creditors.

Shares in Evergrande have shed about three-quarters of their value since August, when trading was restarted after 17-month halt.

5. Oil mixed after touching three-week low

Oil prices hovered around the flatline on Tuesday, after slipping to a three-week low in the previous session due in part to concerns over how elevated interest rates may impact crude demand.

By 04:59 ET, the U.S. crude futures traded 0.1% higher at $88.88 a barrel, while the Brent contract dipped marginally to $90.69.

Economic data on Monday fueled expectations that the Fed may choose to keep rates higher for longer, pushing the U.S. dollar up against a basket of other currencies. The prospect of both higher borrowing costs and a stronger U.S. dollar could make oil more expensive for buyers holding other currencies, potentially hitting demand.

Further weighing on prices was an announcement from Turkey's energy minister that the country would restart operations on a pipeline from Iraq this week that had been suspended for nearly half a year. This partly muddled the outlook for supply, which has been recently driven by a decision by Saudi Arabia and Russia to extend production cuts until the end of 2023.

Futures edge up, JOLTS data ahead, FTX fraud trial begins - what's moving markets

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