Timing of Fed's Bond-Buying Taper in Question After Weak Job Growth in August; RBA Tapers Bond Buying, But Pushes out Program Review

Good day. The U.S. data docket is fairly light this week but some Federal Reserve officials will be speaking, and markets will be watching for what they have to say about plans to start reducing the central bank's bond purchases, which are running at $120 billion a month. Those comments will follow a downer of an August jobs report last week. Employers added only 235,000 jobs last month, well below the average for between May and July. A strong July employment report led some Fed bank presidents to call for the central bank to taper bond purchases at its meeting this month. The slowdown in job growth in August won't help the case for that. Elsewhere, Australia's central bank reduced its weekly government bond purchases but also acknowledged a sharp economic deterioration by pushing out a planned review of its bond-buying program until 2022.

Now on to today's news and analysis.

Top News

Jobs Report Likely Derails Case for September Fed Taper

The slowdown in job growth in August is likely to spoil the case for the Federal Reserve to start reversing its easy-money policies at its next policy meeting, but steady hiring could still lead officials to begin reducing their bond purchases later this year.

RBA Tapers Bond Buying, But Pushes out Program Review Until 2022

Reserve Bank of Australia Gov. Philip Lowe said the bank's weekly bond purchases would fall to 4 billion Australian dollars (US$2.98 billion) per week from A$5 billion, despite forecasts that economic growth will crater in the third quarter.

Derby's Take: Analysts Say Fed's Taper Path Still Alive Despite Weak August Jobs Data

By Michael S. Derby

Weak hiring data for August has rattled economists' estimates of when the Federal Reserve will be able to start pulling back on its asset-buying stimulus, but at least for now they are not taking off the table a reduction in central bank stimulus this year. Read more.

U.S. Economy

Progressives' Tax Dreams Fade as Democrats Struggle for Votes

Progressive Democrats, who had hoped unified party control of the government could spur transformative tax increases on multinational companies and the wealthy, look like they will have to settle for a more modest outcome.

U.S. Ports See Shipping Logjams Likely Extending Far Into 2022

Some of the busiest U.S. ports expect congested maritime gateways to continue deep into next year, as the crush of goods from manufacturers and retailers looking to replenish inventories pushes past shipping's usual seasonal lulls.

U.S. Payroll Growth Slowed in August

The U.S. economy added 235,000 jobs last month, falling far short of economists' estimates for 720,000 new jobs. Job growth last month was also down from upwardly revised payroll gains of 1.1 million in July and 962,000 in June.

Key Developments Around the World

China's Exports Strengthen, Despite Covid-19 Disruptions

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China's exports unexpectedly expanded at a faster clip in August, shrugging off the impact of a global resurgence of the coronavirus pandemic, port congestion and supply bottlenecks.

Fund Manager: ECB Might Follow Fed's Lead

Economic data, including inflation, would suggest that the European Central Bank should slow asset purchases under the Pandemic Emergency Purchase Programme in the fourth quarter at Thursday's meeting, but December is a more likely date for that decision, Nadege Dufosse, global head of cross-asset strategy at Candriam, said. "It would require skillful communication from the ECB to tighten before the Federal Reserve," she added, referring to expectations that the Fed could give an early indication to tapering at the Sept. 21-22 FOMC meeting. (Dow Jones Newswires)

Canada Border Reopening Draws Few Americans

More than three weeks after Canada began allowing fully vaccinated Americans to cross the border, only a fraction of the usual visitors have showed up, further weighing on an economy that contracted unexpectedly in the second quarter.

Mexico's President Revamps Welfare, Handing Out Cash to Millions

Mexico's leftist government has lifted welfare spending by about 20% compared with the previous administration, including payments to eight million elderly and money for a million university students and farmers.

Financial Regulation Roundup

Big European Banks Get Prodded on Climate Promises

Europe's largest banks have pledged to phase out financing carbon dioxide emissions by 2050. But an activist group supported by big shareholders says the lenders aren't doing enough to meet their goals.

El Salvador Adopts Bitcoin as National Currency

The tiny and impoverished Central American nation of El Salvador became the first country to adopt bitcoin as legal tender on Tuesday, allowing Salvadorans to use the cryptocurrency to buy a cup of coffee, get a haircut or even pay taxes and home loans.

Regulators Investigate Crypto-Exchange Developer Uniswap Labs

Goldman Sachs's Petershill Plans London Listing

Goldman Sachs Group Inc.'s Petershill Partners, which invests in private equity and hedge fund firms that collectively manage $187 billion in assets, said Monday it plans to list an investment vehicle on the London Stock Exchange.

German Blue-Chip Index Adds New Companies as It Tightens Rules

Finance executives at German blue-chip companies are facing stricter oversight and governance requirements following the overhaul of Germany's DAX index of leading businesses, which will be expanded by 10 firms this month.

Forward Guidance

Wednesday (all times ET)

Time N/A: National Bank of Poland releases policy statement

10 a.m.: U.S. Labor Department releases July Job Openings and Labor Turnover Survey; Bank of Canada releases interest-rate announcement

1:10 p.m.: New York Fed's Williams speaks at the St. Lawrence University

2 p.m.: Federal Reserve releases beige book report on U.S. economic conditions

3 p.m.: Federal Reserve releases July U.S. consumer-credit data

6 p.m.: Dallas Fed's Kaplan speaks during a virtual town hall sponsored by the Federal Reserve Bank of Dallas

Thursday

7:45 a.m.: European Central Bank releases policy statement

8:30 a.m.: European Central Bank's Enria gives speech at Eurofi Forum in Ljubljana, Slovenia

11:05 a.m.: San Francisco fed's Daly speaks at the Brookings Institution Fall Conference; Chicago Fed's Evans speaks on exploring career pathways in economics and related fields

12 p.m.: Bank of Canada's Macklem gives speech

1 p.m.: Fed's Bowman speaks during the American Bankers Association Fall Government Relations Council Meeting

2 p.m.: New York Fed's Williams speaks on racism and the economy

4 p.m.: Dallas Fed's Kaplan, Minneapolis Fed's Kashkari and Boston Fed's Rosengren speaks on racism and the economy

4:25 p.m.: Boston Fed's Rosengren speaks on racism and the economy

Commentary

Jobs Won't Look Great in September, Either

Covid-19 hit the U.S. job market last month, and now the question is how much of that was because employers were less willing to hire and how much was because it cut into the willingness to find work, Justin Lahart writes.

Basis Points

The U.S. service sector's growth slowed in August amid persistent supply- and labor-related shortages, according to the Institute for Supply Management, whose ISM Services Report on Business PMI fell from July's all-time survey high of 64.1 to 61.7. The reading broadly matches economists expectations polled by The Wall Street Journal. (Dow Jones Newswires)

The Eurozone services sector continued to expand at a strong pace in August, as the final reading for the currency region's services PMI came in at 59.0. The reading is below a 59.7 preliminary estimate and July's 59.8. A reading above 50 indicates an expansion in activity. Below this threshold signals contraction. (DJN)

Wall Street has made a mountain of money available to house flippers, and selling move-in-ready rehabs has rarely been easier. The challenge is finding beat-up and out-of-date properties that can be renovated and resold for a profit.

Aluminum prices rose to their highest level in 10 years Monday after a coup in Guinea threatened to snarl the lightweight metal's supply chain. Guinea is a major supplier of bauxite -- crucial for the manufacturing of aluminum -- and iron ore.

Eurozone retail sales fell 2.3% in July from June, while in June they rose by an upwardly revised 1.8%, statistics agency Eurostat said. Economists polled by The Wall Street Journal had forecast a 0.2% rise for July. On an annual basis, the volume of retail sales rose 3.1% in July following a revised 5.4% rise in June. Eurostat's initial estimate had put June's year-on-year increase at 5.0%. (DJN)

Australia's economy may not grow at all this year as lengthening Covid-19-related lockdowns in major growth states drive a cratering of national output and a jump in unemployment in the third quarter, according to the chief economist at Westpac, who has slashed the bank's forecast for gross domestic product growth this year from 2.4% to zero. (DJN)


  (END) Dow Jones Newswires
  09-07-21 0901ET
  Copyright (c) 2021 Dow Jones & Company, Inc.

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