Markets await key US jobs data

Source: Bloomberg

Middle East

Tensions between the US and Iran escalated sharply this week, raising fears of a wider conflict in the Gulf and pushing oil prices higher. The latest flare-up began after US strikes on Iranian military targets near the Strait of Hormuz, including rocket launchers that Washington said could be used to threaten shipping. Iran responded with missile and drone attacks on US military facilities and allied targets in the region, while both sides exchanged threats of further action. The confrontation marked the most significant exchange of fire between the two countries since July and renewed concerns about security in the Strait of Hormuz, through which around a fifth of global oil supplies normally pass.

The oil market reaction was immediate. Brent crude climbed to around $95-$97 a barrel, reaching six-week highs, as traders priced in a greater risk of supply disruption. Shipping through the Strait of Hormuz remained well below normal levels, tanker traffic declined and Iran increased restrictions on vessels using the waterway, prompting concerns that any further escalation could curtail exports from the Gulf. 

Economics

Markets await the most important economic data release of the week late on Friday – the US non-farm payrolls data for August. The report is particularly important because it is the last major labour market release before the Federal Reserve's 15-16 September policy meeting. The data is expected to show that the US economy added around 50,000 to 55,000 jobs after an unexpected decline of 23,000 in July. Economists also expect the unemployment rate to hold at 4.1%, while average hourly earnings are forecast to rise about 0.2% month-on-month and 3.0% year-on-year. After Federal Reserve chair Kevin Warsh struck a hawkish tone at Jackson Hole and indicated inflation remains the central concern, market participants are mulling whether the US central bank could raise interest rates again. A stronger-than-expected payrolls figure would suggest the labour market remains resilient and could reinforce expectations of tighter monetary policy, while a weak report would support the view that hiring is slowing and reduce the likelihood of further rate increases. 

US manufacturing activity remained healthy in August, with the ISM Manufacturing PMI easing to 54.6 from 55.6 in July but still indicating an eighth consecutive month of expansion. New orders, production and employment all stayed in growth territory, although demand momentum softened somewhat and price pressures remained elevated, suggesting manufacturers continue to face higher input costs. 

Meanwhile, the July Job Openings and Labor Turnover Survey (Jolts) showed job openings at 7.27 million, slightly below expectations and indicative of a gradually cooling labour market. Taken together, the data point to an economy that is still expanding but with signs of moderation in both manufacturing demand and labour market tightness, factors that are important for the Federal Reserve's assessment of inflation and interest rate policy.

UK shop price inflation accelerated to 1.5% year-on-year in August from 0.9% in July, its highest level in more than two years, according to the British Retail Consortium's monthly shop price index. The increase was driven by a rise in food inflation to 2.8% from 2.2%, particularly for processed and imported foods, while non-food inflation rose to 0.9% from 0.2% as retailers faced higher energy, commodity and input costs and increased prices for some electrical goods amid strong demand for AI-related components. While shop price inflation remains below the headline consumer price index, the data suggests cost pressures are beginning to feed through more broadly into retail prices, potentially adding to pressure on household budgets in the months ahead.

Company news

Shein's long-awaited Hong Kong flotation had a muted reception, highlighting how far the fast-fashion retailer's fortunes have shifted since its pandemic-era boom. The company raised about HK$13.6bn ($1.7bn) in Hong Kong's largest IPO of 2026, but the listing valued Shein at just $26.5bn, down sharply from its $100bn private-market peak in 2022. The shares fell as much as 10% on their market debut before recovering to finish broadly around the offer price, reflecting investor concerns over slowing growth, pressure on margins from US and European tariff changes, and increased competition. The Hong Kong listing finally provided a route to the public markets after failed attempts to float in New York and London, but the subdued debut suggested investors remain cautious about the sustainability of Shein's ultra-low-cost business model.

Bunzl reported a strong set of interim results, marking a fifth consecutive quarter of positive underlying growth. The distributor raised its interim dividend by 3.0% to 20.8p a share, announced a new £500m share buyback programme and upgraded its full-year outlook, saying it now expects operating margins to be broadly flat year-on-year and modest growth in adjusted operating profit at constant exchange rates.

Palo Alto Networks reported strong fourth-quarter results as demand for AI-driven cybersecurity products continued to accelerate. Management highlighted the growing threat from AI-powered cyberattacks as a major driver of spending and said the company added nearly $1bn of net new recurring revenue during the quarter. Palo Alto also issued upbeat guidance for fiscal 2027, forecasting revenue growth of 23% to 24%, although GAAP results were weighed down by acquisition and other charges, resulting in a net loss of $282m.

Broadcom delivered record third-quarter results, driven by surging demand for artificial intelligence chips and networking products. Looking ahead, Broadcom forecast fourth-quarter revenue of about $34.8bn and expects AI semiconductor revenue to accelerate further to $21.7bn, underscoring continued momentum from AI-related spending despite some investor disappointment that revenue guidance came in slightly below Wall Street expectations.

Dell Technologies reported record second-quarter results, highlighting the continuing boom in artificial intelligence infrastructure spending. The company booked a record $60.9bn of AI server orders during the quarter and ended the period with a $95bn backlog, underscoring strong demand from data centre customers. Reflecting this momentum, Dell raised its full-year guidance, forecasting fiscal 2027 revenue of $192bn and saying AI-driven demand is expanding across its broader portfolio of servers, storage, networking and personal computers.