By Geoffrey Smith
Investing.com — One of China’s largest cities goes into lockdown due to the COVID-19 outbreak, dragging commodities and stocks lower around the world. US stocks are set for a fifth consecutive decline, ahead of the release of more labor market data and the ISM manufacturing survey. China’s private sector manufacturers contracted again last month. NVIDIA added to chipmakers’ litany of woes, and Broadcom reports earnings after the bell. Here’s what you need to know in the financial markets on Thursday, September 1.
1. China lockdown drags commodities and stocks lower
Beijing’s COVID Zero policy returned to haunt commodity markets overnight as the city of Chengdu, the capital of Sichuan province and home to 21 million people, went into lockdown.
The news hit base metal prices particularly hard, with , and all falling more than 2%, while they fell more than 6%. Mining stocks such as BHP (LON:) and Rio Tinto (LON:) also fell hard in London.
While Chengdu has nothing like Shanghai’s direct importance to world markets, it is nonetheless a major industrial hub. Volvo Cars (ST:) said its plant there will temporarily close. Others are likely to follow.
2. US jobless claims, ISM survey
The flow of US economic data continues thick and fast with the August Challenger survey at 07:30 ET, the weekly release at 08:30 ET, and finally the Institute of Supply Management at 10:00 ET
The data will be released in a market whose hopes for a quick end to the monetary policy tightening cycle have taken a succession of blows in the past week, the latest comments being from Cleveland Fed President Loretta Mester. , on Wednesday. She specifically discussed the idea of a first rate cut before 2024.
The Challenger survey is likely to confirm an uptick in the pace of layoffs, but recent jobless claims figures, and Tuesday’s Labor Department survey, have suggested plenty of other jobs are still available. Initial applications are expected to have risen slightly to 248,000.
The ISM PMI may be more interesting, in what it says about progress in overcoming supply chain bottlenecks. However, Wednesday’s ADP report confirmed that net hiring in manufacturing has stalled.
3. Stocks to Open Lower as Hopes for a Fed Pivot Fade
US stock markets aren’t even attempting their usual pre-market bounce this morning as news from China dealt another blow to sentiment about the economy without offering much in the way of the downside. inflation pressure to compensate.
At 06:20 ET, they were down 161 points, or 0.5%, while down 0.7% and down 1.1%. Major spot indices have fallen for four days in a row, losing between 0.6% and 0.9% this Wednesday.
Stocks likely to be in the spotlight later include Bed Bath & Beyond (NASDAQ:), whose latest drastic cost-cutting measures did little to stop the stock from selling off, even in after-hours trading on Wednesday, and Walt Disney (NYSE:), which the Wall Street Journal reported was planning a membership scheme similar to Amazon’s Prime service.
Hormel Foods (NYSE:) and campbell soup (NYSE:) report early gains, while Lululemon (NASDAQ:) is up after the closing bell.
4. NVIDIA warns of a new blow to sales in China; In view of Broadcom earnings
Semiconductors are also likely to be in the spotlight after NVIDIA (NASDAQ:) warned of another hit to revenue from US restrictions on sales of its AI chips to China.
NVIDIA said it could lose $400 million in sales each quarter due to a new requirement to obtain a license to export some of its products.
The news comes amid a rough week for chipmakers: Korean chipmakers reported their first quarterly drop in shipments three years earlier, while unsold chip inventories rose 80% on the year.
All of that makes for an interesting backdrop to Broadcom’s (NASDAQ:) quarterly report after the bell.
5. Oil plummets during lockdown, Caixin PMI news
Crude prices also fell to a two-week low on bad news from China, which was not limited to Chengdu. The , a gauge of private-sector manufacturing activity, slipped back into contraction territory last month to a worse-than-expected level of 49.5.
That is outweighing any short-lived support from a surprising 3.3 million-barrel drop last week.
At 06:30 ET, futures were down 2.3% at $87.52 a barrel, while they were down 2.4% at $93.39 a barrel.