European Stocks and Wall Street Futures Rise as Investors Mull Fed Taper Timing

European stocks and Wall Street futures edged up on Monday, aided by the chance that the Federal Reserve would delay tapering stimulus after last week’s disappointing U.S. jobs report.

In Europe, the STOXX index of 600 European companies was up 2.92 points, or 0.62 percent, by 6:10 a.m. ET, not far off a record high hit in mid August. The German DAX index was up 92.30 points, or 0.58 percent, London’s FTSE 100 was up 45.57 points, or 0.64 percent, and the French CAC 40 was up 44.33 points, or 0.68 percent, by 6:10 ET.

Nasdaq futures inched up 41.75 points, 0.27 percent, while S&P 500 futures were up 8.75 points, or 0.19 percent, and Dow Jones futures climbed 77 points, or 0.22 percent, by 6:00 ET, ahead of a Labor Day market holiday in the United States.

The DXY dollar index, which measures the currency against six major rivals, rose 0.25 points, 0.27 percent, to 92.25 by 6:00 ET after falling to its lowest level in a month on Friday, when the Labor Department’s closely watched non-farm payrolls showed American employers created about a third of the number of jobs economists expected.

The Labor Department’s jobs report, released Sept. 3, showed that non-farm payroll employment rose by 235,000 in August, down from an upwardly revised 1.05 million jobs added in July and far below the FactSet-provided consensus forecasts of 750,000.

Some experts argue the weak print in Friday’s non-farm payrolls data weakens the case that enough progress has been made in the labor market recovery and is likely to draw out the timeline for a Fed decision on trimming asset purchases, known as tapering. The Fed has been buying around $120 billion in monthly purchases of Treasury and mortgage securities, one of the crisis support measures the central bank deployed last year to help lift the economy from the pandemic recession.

“This latest employment snapshot interrupts the process of substantial further progress as called for by the Federal Reserve as it considers dialing back on boosting the economy,” Bankrate Senior Economic Analyst Mark Hamrick said in an emailed statement to The Epoch Times. “The immediate question for the central bank is when to begin dialing back on monthly asset purchases as a prelude to an eventual increase in benchmark interest rates.”

“This jobs report appears to give Federal Reserve officials some more time to decide or begin,” Hamrick added.

The labor market is the key touchstone for the Fed, with Federal Reserve chair Jerome Powell hinting at the Jackson Hole Symposium several weeks ago that reaching full employment was a prerequisite for the central bank to start tapering asset purchases.

Powell said at the symposium that if further signs confirm the strength of the labor market recovery, this could make it “appropriate to start reducing the pace of asset purchases this year,” with some analysts predicting a possible announcement as soon as during the Fed’s next policy meeting over Sept. 21–22. But the disappointing jobs report has prompted a revaluation of those expectations.

Wells Fargo analysts wrote in a note (pdf) that the downbeat non-farm payrolls number means the door is “fully closed” on a September taper announcement.

“It strikes us as highly unlikely the FOMC [Federal Open Market Committee] will announce a taper of its asset purchases at its September 21–22 meeting. Today’s miss on nonfarm payroll growth will disappoint top Fed officials who have signaled that it would take a couple more reports of 500K–1M jobs per month in order for ‘substantial further progress’ to be achieved,” they wrote.

Tom Ozimek

Tom Ozimek has a broad background in journalism, deposit insurance, marketing and communications, and adult education. The best writing advice he’s ever heard is from Roy Peter Clark: ‘Hit your target’ and ‘leave the best for last.’

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