Stocks came under pressure at the end of last month, forcing traders to rebalance or reposition their portfolios. Such activity is routine at the start of any new month, especially after a long holiday weekend. As market participants update their portfolios, some of the apparent current recovery can likely be explained by these portfolio shifts.
The long-awaited Non-Farm Payroll (NFP) report to be released tomorrow is the center of attention for traders. Analysts agree that markets could continue to show some sideways movement in consolidation ahead of this important economic bellwether. Just last week, Federal Reserve Chair Jerome Powell suggested that the central bank might cut rates. This is all happening as widespread rising unemployment risks are making greed a dangerous sentiment for investors.
Yesterday, global markets started to stabilize, particularly during the US trading session. With the highly-anticipated NFP data just around the corner, many investors adopted a wait-and-see approach. This trend was mirrored in the Asian markets, which saw some consolidation and a move to steadiness. Trading on US markets will be back to normal on Tuesday after Labour Day. Market participants believe that activity will remain calm through the middle of the week.
Traders are understandably sensitive to the fact that the NFP report may determine what direction monetary policy takes in the coming months. The report provides essential information about employment trends. The Federal Reserve would be very concerned about continuing positive trends in these measures when deciding whether to raise or lower interest rates. The uncertainty that has surrounded this data has led to a tight but calm state in financial markets.