With a relatively quiet start to the morning in European markets, US index futures are sitting a shade lower than last night’s close, but traders are by all accounts waiting for the next key data point. Positive progress in including Canada into any replacement for NAFTA would certainly be well received, but ahead of the open it’s the non-farm payrolls - and perhaps more critically the wage growth data - that will be in focus.
We saw a slight wobble in the ADP payroll figures yesterday, but the absolute number in work isn’t the key point right now. It’s the pace of wage growth that sits very much in focus, in terms of how the Federal Reserve acts regarding monetary policy in the medium term.
A September rate hike is seen as being as good as nailed on, but weak salary increases are going to make it very difficult for the Fed to keep hiking rates without stubbing out inflation. Any suggestion that this is indeed going to be the case may knock the dollar but it also stands to bolster equity valuations. We could see more volatility in futures before the opening bell.
Ahead of the open we’re calling the Dow down 31 at 26965 and the S&P down 3 at 2875.