Next week's key agenda: US August non-farm payrolls, China August Caixin PMI, NIO financial report

A summary of major financial events from September 2nd to September 8th, all in Beijing time:

Key focus this week: US August non-farm payrolls, ADP employment data, China's August Caixin PMI and foreign exchange reserve data, speeches by senior officials of the Federal Reserve, Eurozone GDP for the second quarter, and NIO's financial report for the first half of 2024.

In addition, the commerce departments of China and the US held a working meeting in Tianjin.

US August Employment Data

On Friday (September 6th), the US Department of Labor released the August non-farm payroll report.

The non-farm payroll report for July showed an increase of 114,000 jobs, the lowest since December 2020, far below the expected 175,000 jobs, and a significant decrease from the previous 206,000 jobs (revised down to 179,000); the unemployment rate in July rose by 0.2 percentage points from the previous month to 4.3%, hitting the highest level since October 2021, exceeding the expected 4.1%.

Due to the much lower-than-expected non-farm data for July and the unemployment rate triggering the recession indicator with 100% accuracy - the Sam rule, market panic was ignited. Traders began betting on the possibility of a 50 basis point rate cut in September after the data was released, and predicted that the rate cut for the year would exceed 110 basis points.

Furthermore, the revised annual employment data up to March released at the end of August showed a significant downward revision of 818,000 in annual non-farm employment. Over the past three months, job growth has averaged 170,000 per month, indicating further weakness in the labor market and increasing the likelihood of a Fed rate cut.

On August 26th, Goldman Sachs analysts Jan Hatzius, Alec Phillips, David Mericle, and others released a report stating that downward revisions of 300,000 or 25,000 per month are accurate, with an overall job growth rate of about 160,000 jobs per month. Quarterly Census of Employment and Wages (QCEW) data suggests misleading information.

According to Bloomberg survey data, economists currently expect US non-farm payrolls for August to increase from 114,000 in the previous month to 165,000, with the unemployment rate dropping by 0.1 percentage point to 4.2%, indicating resilience in the job market.

In addition to non-farm data, other major employment data will also be released this week.

On Wednesday (September 4th), the US Bureau of Labor Statistics will release the July JOLTS job openings data.

Data released on July 30th showed that there were 8.184 million job openings in the US in June, with expectations at 8 million. The May figure was revised from 8.14 million to 8.23 million, exceeding the expectations of most economists. Since hitting a record high of 12.18 million in March 2022, JOLTS job openings have generally been on a steady decline as the Fed's significant rate hikes have led to a slowdown in demandThe June JOLTS report shows that the US labor market has not deteriorated as many increasingly pessimistic individuals have claimed. However, the financial blog Zerohedge mentioned that private sector job vacancies have once again significantly decreased, falling to levels seen in late 2018, while government job vacancies are only slightly lower than historical highs.

On Thursday (September 5), the US released the August ADP Employment Report.

The ADP employment figures are often referred to as "small non-farm payrolls." Previously, the July ADP new employment figures fell more than expected, with wage growth slowing to the lowest level in three years, signaling a slowdown in the US labor market and further solidifying expectations of a rate cut in September.

ADP's Chief Economist Nela Richardson stated that as wage growth slows, the labor market is changing in line with the Federal Reserve's efforts to curb inflation. If inflation rises again, it will not be due to labor.

Currently, economists generally expect that the August ADP employment figures will increase from the previous 122,000 to 148,000, once again indicating signs of a warming job market.

China's August Caixin PMI and Foreign Exchange Data

On Monday (September 2), IHS Markit released China's August Caixin Manufacturing PMI.

On Wednesday (September 4), IHS Markit released China's August Caixin Services PMI and Composite PMI.

The official manufacturing PMI released by the National Bureau of Statistics on August 31 was 49.1, a decrease of 0.3 percentage points from the previous month. Manufacturing sentiment fell slightly, but the PMI for large enterprises remained in expansion, and the non-manufacturing sentiment slightly improved.

Zhao Qinghe, a senior statistician at the National Bureau of Statistics Service Survey Center, interpreted the August PMI data by stating, "Affected by factors such as recent high temperatures, heavy rainfall, and the off-season production in some industries, the manufacturing PMI in August dropped to 49.1%, showing a slight decline in sentiment. Among them, the sentiment in high-energy-consuming industries is weak and has decreased significantly, which is one of the main reasons for the decline in the manufacturing PMI this month."

Analysts Tao Chuan and Zhong Yumei from Minsheng Securities pointed out that behind the marginal decline in PMI lies various negative impacts from extreme weather (record high number of hot days in August in many regions) and natural disasters (frequent occurrences of heavy rain, floods, typhoons, etc.), which have amplified the decline in PMI.

Minsheng Securities stated that excluding these short-term factors, the PMI data reveals that the trend of economic differentiation is still ongoing, gradually surpassing the PMI new export orders index with the PMI new export orders index, confirming the current "weak domestic demand, strong external demand" situation. Given that there is still some distance to go before demand fully recovers, we believe September may be a point for policy easing, although the arrival of policies may be more "gradual" in nature.

On Saturday (September 7), the People's Bank of China released the August foreign exchange reserves.

The July foreign exchange reserves data showed that China's foreign exchange reserves stood at $3.2564 trillion, an increase of $34 billion from the end of June, representing a 1.06% increase. This marks the seventh consecutive month that China's foreign exchange reserves have remained above the $3.2 trillion markAt the end of July, China's gold reserves reported 72.8 million ounces, unchanged from the previous month, marking the People's Bank of China's third consecutive month of pausing gold purchases.

According to the World Gold Council's release on the second-quarter gold demand trends, global gold demand (excluding OTC transactions) in the second quarter was 929 tons, a 6% year-on-year decrease.

Speeches by Senior Officials of the Federal Reserve

On Friday, September 6, the "third figure" of the Federal Reserve, FOMC permanent voter and New York Fed President Williams, and Federal Reserve Board member Bullard will deliver speeches successively.

Previously, Federal Reserve Chairman Powell, speaking at the Jackson Hole Global Central Bank Annual Symposium, took a dovish stance, stating, "The time for policy adjustment has come. The policy direction is clear, and the timing and pace of rate cuts will depend on subsequent data, changes in outlook, and risk balance."

Powell's remarks have paved the way for a rate cut in September, prompting a swift market response. Market expectations for rate cuts in 2024 have been raised to 104 basis points, with a prediction of four 25-basis-point rate cuts by the end of the year, and a total cut of 213 basis points by the end of 2025.

NIO's First-Half Financial Report

On Thursday, September 6, NIO released its first-half performance report.

The Q1 financial report released on June 6 showed that NIO's revenue in the first quarter of this year was 9.908 billion yuan, down 7.2% year-on-year and 42.1% quarter-on-quarter. Among them, the revenue from the automotive business was 8.38 billion yuan, down 9.1% year-on-year and 45.7% quarter-on-quarter.

NIO attributed the decline in first-quarter revenue mainly to the average selling price reduction and decreased delivery volume resulting from user rights adjustments since June last year. Data shows that NIO delivered over 30,000 new cars in the first quarter of this year, a 3.2% year-on-year decrease and a 39.9% quarter-on-quarter decrease.

Official data shows that in June 2024, NIO delivered a total of 21,209 new cars, a 98% year-on-year increase, setting a historical record. In the second quarter, NIO delivered 57,373 new cars, exceeding delivery guidance, with a 143.9% year-on-year increase. In the first half of the year, NIO delivered a total of 87,426 new cars, a 60.2% year-on-year increase.

Other Important Data, Meetings, and Events

• On Monday, September 2, the U.S. financial markets were closed for Labor Day.

September 5 was Labor Day in the United States, with the U.S. stock market closed on the 1st and resuming normal trading on the next day, September 6 (Tuesday). In addition, ICE's contract trading under the U.S. (ICE) ended at 01:30 Beijing time on the 3rd, and CME's precious metals and U.S. crude oil futures contracts ended at 02:30 Beijing time on the 3rd.

• On Tuesday, September 3, the U.S. released the August ISM Manufacturing Index.

The data released in July showed that the U.S. manufacturing PMI fell to 46.8, below the expected 49 and June's 48.5. Sub-indices such as employment, output, and new orders all weakened significantly, once again raising concerns about the U.S. economy entering a recessionHowever, Zhongjin's Liu Gang analysis pointed out that compared to service consumption, industries such as real estate and manufacturing that are sensitive to interest rates are most affected. It is necessary to distinguish between slowing down and recession. When comparing a "soft landing" slowdown and a "hard landing" recession, one needs to consider the depth of the decline and whether the Fed's interest rate cuts can "rescue" the situation.

Currently, economists generally expect that the August ISM Manufacturing Index will rise from 46.8 last month to 47.5, marking the fifth consecutive month below the boom-bust line.

• Thursday (September 5), Opening Ceremony and Keynote Speech of the 2024 China-Africa Cooperation Forum

According to the official website of the Ministry of Foreign Affairs, Deputy Minister of Foreign Affairs Chen Xiaodong stated that the 2024 China-Africa Cooperation Forum will be held in Beijing from September 4th to 6th. Leaders from China and Africa will gather around the theme of "Joining Hands to Promote Modernization and Build a High-Level China-Africa Community of Shared Future," to renew friendship, discuss cooperation, and talk about the future.

Chen Xiaodong mentioned that the summit will include a welcome banquet, opening ceremony, four high-level meetings on governance, industrialization and agricultural modernization, peace and security, and high-quality joint construction of the "Belt and Road," as well as the 8th China-Africa Entrepreneurs Conference. The President will deliver an important keynote speech, elaborating on new concepts and propositions for building a high-level community of shared future between China and Africa, and announcing new actions and initiatives for practical cooperation with Africa. The summit will also produce two outcome documents, the "Declaration" and the "Action Plan," to consolidate major consensus and plan the path for high-quality cooperation between China and Africa in the next three years.

• Thursday (September 5), The Federal Reserve releases the Beige Book, a report on economic conditions compiled by the 12 regional Federal Reserve Banks.

The Beige Book is typically released two weeks before the Federal Open Market Committee (FOMC) policy meeting and is an important basis for Federal Reserve officials to assess the development of the U.S. economy and inflation trends.

The economic conditions Beige Book released on July 17th showed that overall economic activity in the U.S. remained at a "slight to modest pace" as before. However, compared to the May report, the latest report added three regions stating "economic activity was flat or declined," and respondents expect the pace of economic growth to slow down in the next six months.

Regarding the labor market, descriptions in the Beige Books from May and July both indicated "slight growth." Most regions reported stable or "slightly rising" employment rates, with more regions mentioning stable or declining employment rates, and only a few regions reported "moderate" employment growth. Due to a slowdown in new orders, several regions reported a decrease in manufacturing employment.

On the consumption side, the report noted that while consumer spending was generally reported to have remained almost unchanged, nearly every region mentioned retailers discounting goods or price-sensitive consumers only purchasing essentials, reducing quality, buying fewer items, or comparing prices to find the best deals.Overall, the respondents' short-term outlook is not optimistic: "Due to the upcoming US presidential election, domestic policies, geopolitical conflicts, and inflation uncertainties, people expect slower growth over the next six months."

• On Friday (September 6), the Eurozone released the final values of the second quarter GDP on a quarter-on-quarter and year-on-year basis.

Previously released GDP preliminary data showed that the Eurozone's GDP grew by 0.3% on a quarter-on-quarter basis in the second quarter, maintaining the same pace as the beginning of the year, exceeding expectations of 0.2%, and grew by 0.6% year-on-year. The European Commission expects the Eurozone economy to grow by 0.8% this year. However, due to continued pressure on the industrial sector from high interest rates, equipment and construction investments declined, leading to an unexpected contraction in the German economy.

• On Saturday (September 7), the commerce departments of China and the United States held a working meeting in Tianjin.

According to Xinhua News Agency, spokesperson for the Ministry of Commerce, He Yadong, stated at a routine press conference on the 29th that, by mutual agreement, the commerce departments of China and the United States plan to hold the second deputy ministerial-level meeting of the China-US trade and economic working group in Tianjin on September 7. Wang Shouwen, China's Vice Minister of Commerce and International Trade Negotiations Representative, will co-chair the meeting with US Deputy Commerce Minister Lago. Both sides will have in-depth exchanges on concerns regarding their respective trade and economic policies, corporate demands, and practical cooperation.

IPO Opportunities

During the week of September 2 to September 6, there were 2 new A-share IPOs.

A total of 32 new funds were issued that week (combining A and C classes), including 11 bond funds, 6 hybrid funds, 0 stock funds, 13 index funds, and 1 Reit.