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On August 4th, Saudi Aramco CEO Amin Nasser stated that last months attacks on its assets did not have a material impact on its operations, and that the company is working to expand its oil export capacity due to the ongoing impact of the war with Iran on the Strait of Hormuz. This comes after the Saudi energy giant reported that its critical infrastructure was targeted in the July attacks. This is the companys first acknowledgment of the attacks since the incidents began. Oil traders had been closely examining footage from last month showing suspected oil tank fires and flare burning across Saudi Arabia. "Some of the companys facilities were attacked, but the impact on operations or finances was not significant," Nasser said. "The same was true in July. Even with the July attacks, there was no material impact on our capabilities."Abu Dhabi National Oil Company (ADNOC) said the new deployment allows engineers to oversee up to three times the number of drilling rigs and helps avoid up to two days of downtime.Saudi Aramco CEO: Oil exports to Asia via the Suez Canal take 20-25 days longer than those via the Strait of Hormuz.On August 4th, Futures Market News reported that the main contract for container shipping index (European route) fluctuated upwards in the morning session, rising over 4% intraday. In the afternoon, the main contract for container shipping index (European route) plummeted, falling over 4% at one point, ultimately closing down 3.36% at 1726 points. 1. In terms of news, according to the latest report from CCTV News, the US, citing Iranian and US officials, stated that Iran and Oman are close to reaching an agreement on navigation in the Strait of Hormuz. US sources indicate that, according to the agreement discussed by both sides, ships entering the Persian Gulf will use a route closer to the Iranian coast and controlled by Iran, while ships leaving will use a route closer to Oman. 2. Some analysts believe that the price of container shipping index (European route) futures has ended its one-sided trend and entered a high-volatility phase characterized by "weak fundamentals and risk premium support." The navigation situation in the Red Sea is a key variable. If tensions in the Red Sea escalate, more shipping companies will adjust their routes and expand the scope of suspended services, then the geopolitical risk premium will continue to push up the price of near-month contracts. Conversely, if the situation in the Red Sea eases, the market will revert to fundamentals and give back its gains. Going forward, a range-bound trading strategy is recommended, with close monitoring of the Bab el-Mandeb Strait navigation status, major shipping companies suspension of operations, and changes in war risk premiums.According to TASS, citing the Russian Ministry of Defense, Russia has struck a logistics center in the Sumy region of Ukraine.

ADP prospects in the United States: Although it has differentiated from non-agricultural, the popularity of "small non-agricultural" still cannot be underestimated

Oct 26, 2021 11:04

The market currently predicts that ADP's private sector employment will increase by 430,000 in September. The number of ADP employed in July and August was about half of what was expected. The September non-agricultural employment data is the key to the Fed's reduction of debt purchases.



ADP data and non-agricultural data are differentiated


Recently, the monthly correlation between the number of private employment from the Automatic Data Processing Corporation (ADP) and the national data of the Ministry of Labor is weak. However, these data came in a timely manner, released two days earlier than the government data, and they are the largest data in the country outside the non-farm employment report. Currently, analysts expect ADP's US companies to add 430,000 employees in September.

In the past six months, ADP data has failed to provide an early warning of fluctuations in non-agricultural data. In April, the market expected the non-agricultural employment population to increase to 978,000 from 785,000 in March. However, the actual number of non-agricultural employment was beyond market expectations, and only 269,000 new jobs were provided. The ADP employment change report rose from 519,000 to 662,000 that month.


(U.S. ADP employment population historical data)

In July, the non-agricultural employment population increased from 962,000 in June to 1.053 million, the best total since August 2020. In contrast, ADP's July data dropped from 741,000 to 326,000. Finally, the number of non-agricultural employment in the United States fell by 818,000 last month to 235,000. The August ADP data rose slightly from above 326,000 to 374,000.


(History of non-agricultural employment population in the United States)


From another perspective, in the five changes in the past six months, the non-agricultural employment population and ADP moved in the same direction only once, and that was in May. In the long period before this, the trend correlation between non-agricultural employment population and ADP is quite good. Both reports fell sharply in April 2020, followed by a large number of re-hiring in the following three months, and both reported negative values in December last year.

The trend of the U.S. labor market is hard to discern


For months, the US labor market has been publishing some confusing data. The number of jobs offered in August reached a record close to 11 million, while only 235,000 were recruited that month.


(Job vacancy at JOLT's in the US)

The situation of the initial application for unemployment benefits also forms another contrast. Despite the huge number of job vacancies, weak recruitment in August, and non-agricultural employment data in September are expected to be flat, the number of people applying for unemployment benefits for the first time has increased for three consecutive weeks. The number of applicants for unemployment benefits has increased from the lowest level of 312,000 in the week of September 3 to 32,000.

Another strange phenomenon is the unemployment rate. Ignoring the changes in recruitment this year, the rate is declining every month, from 6.3% in January to 5.2% in August.


(U.S. unemployment rate)

Officials and analysts believe that one of the reasons workers are clearly reluctant to return to work is that the Biden administration has extended the period of federal unemployment benefits. These supplementary subsidies expire in early September, so a large number of people are expected to return to work. However, the market does not seem to have strong confidence in employment recovery, and the non-agricultural employment population in September is expected to be only 45,000.

Some analysts also believe that the epidemic and its countermeasures have created a new economic situation, so that standard statistics, indicators, and analysis at best can only reflect part of what is happening in the labor market.

What is the outlook for the Fed's cuts?


The market is waiting for the Fed to confirm its plan to reduce the scale of bond purchases. The information that is good for a quick cut will support U.S. Treasury bond interest rates and the U.S. dollar. The dynamics of the labor market may have changed, but market transactions are based on traditional information and its impact on policy. Strong non-agricultural employment data will make it easier to explain and prove the reduction in debt purchase plans.

The ADP report may not be a reliable indicator of American employment, but as the most valuable data before non-agricultural, investors still inevitably pay attention to it. The changes in this data may still have a certain impact on the market.

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