U.S. financial markets are closed Monday for Labor Day, but investors are gearing up for a critical week, with the release of fresh labor market data expected to influence Federal Reserve rate-cut expectations. At the same time, the legal battle over Trump-era tariffs is intensifying, with a federal appeals court recently striking down the levies.
Thin holiday trading and mixed performance in Asia
With U.S. markets closed, Asian equities were mixed. Japan’s Nikkei and South Korean shares fell, while Chinese stocks continued their recent rally, boosted by stronger-than-expected manufacturing activity surveys. Alibaba (NYSE:BABA) shares soared over 10%, marking its largest single-day gain since 2022, fueled by optimism surrounding its cloud division.
Wall Street has steadily recovered since April’s tariff-driven decline, supported by hopes that President Donald Trump’s tariffs will not derail the U.S. economy and by excitement over AI investment potential. Analysts note that this week’s economic indicators and the Fed’s interest rate decision could shape September market sentiment.
Trump tariffs face court challenge
The Trump administration’s import taxes have faced legal pushback, particularly over the president’s use of emergency powers. A ruling Friday from the U.S. Court of Appeals for the Federal Circuit rejected the tariffs, upholding a lower court decision. The White House has until mid-October to appeal to the Supreme Court, or the decision will take effect.
Vital Knowledge analysts said in a note to clients: “The appeals court decision is at best neutral for markets. It won’t come close come close to eliminating Trump’s import taxes, and it just creates more uncertainty for Corporate America as the White House searches for a studier legal scaffolding for its draconian trade policy[.]”
U.S. labor data in focus
Friday’s nonfarm payrolls report will provide insight into economic health and serve as a key gauge of investor confidence that the Fed will cut rates in September. Last month’s soft jobs report fueled expectations for a rate cut, even as officials remain cautious about inflation. Fed Chair Jerome Powell noted rising risks to the labor market at a Wyoming symposium. CME FedWatch Tool indicates more than an 87% probability of a 25-basis-point cut at the Sept. 16-17 meeting. Economists expect August nonfarm payrolls to rise by 74,000, close to July’s 73,000.
China factory activity shows early improvement
A private survey revealed China’s manufacturing activity expanded at the fastest pace in five months in August. The RatingDog China General Manufacturing PMI climbed to 50.5 from 49.5 in July, exceeding forecasts of 49.7.
“New export orders are still in contraction, but the pace of decline has eased. That’s encouraging, yet we shouldn’t get carried away, because external demand looks partly pulled forward while domestic demand stays soft, so the upside to output may be limited unless domestic demand firms up,” said Yao Yu, Founder at RatingDog. Employment remained weak for the fifth month, with higher input costs and persistent supplier delays restraining optimism.
Oil prices move higher
Oil traded higher Monday as markets weighed potential supply disruptions from Russian-Ukrainian airstrikes against rising OPEC+ output and U.S. tariffs. By 03:41 ET, October Brent futures were up 0.5% at $67.81 per barrel, while WTI gained 0.6% to $64.36 per barrel. Both contracts fell more than 7% in August amid concerns of oversupply.
“Oil prices settled lower last week despite growing European calls for secondary sanctions on buyers of Russian oil and gas. The mild reaction may suggest the market is becoming increasingly numb towards sanction risks,” ING analysts said. Ukraine’s president added on Sunday that retaliatory measures would follow Russian drone strikes targeting power facilities, following weeks of attacks threatening Russian oil exports.
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