MARKET WRAPS

Stocks:

European markets traded mixed ahead of U.S. non-farm payroll data due later Friday.

European investors welcomed poorer-than-expected data, with the Markit composite and services PMIs for the Eurozone both falling slightly short of expectations and marking declines from July -- potentially signaling that growth is slowing.

Shares on the move:

Shares of emerging-markets asset management firm Ashmore Group fell 4.6% in London trading after it posted full-year results that showed net revenues were down.

Data in focus:

Germany's service sector maintained a solid pace of recovery in August, but the expansion eased slightly from July's record high, a survey of purchasing managers indicates. IHS Markit's services PMI for Germany fell to 60.8 in August from 61.8 the previous month.

The survey pointed to a continued increase in demand but firms reported difficulties in meeting it due to insufficient capacity and material shortages, the report said.

While the Delta variant and supply-chain disruptions pose downside risk, businesses remain optimistic in the short term, IHS Markit's economics director Phil Smith said.

"Although the rate of expansion on a monthly basis looks like it has passed its peak, the scene is already set for strong growth in the third quarter," Smith said.

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The U.K.'s service sector experienced subdued export orders that weighed on overall new business intakes in August, according to the IHS Markit/CIPS purchasing managers survey.

Many survey respondents blamed a lack of inbound tourists due to the pandemic, while some others cited Brexit trade frictions.

"Brexit continued to make its mark and supply shortages and logistics difficulties will pile on the pressure in the coming months but service companies remained buoyant about future opportunities," CIPS director Duncan Brock said.

The U.K. services purchasing managers index for August was downwardly revised to 55.0 from an initial estimate of 55.5, compared with 59.6 in July. However, a level above 50 signals an expansion in sector activity.

U.S. Markets:

Stock futures edged higher ahead of the August employment report, which will indicate the strength of the labor market recovery.

The fresh jobs figures could influence the Federal Reserve's timetable for scaling back stimulus policies that have supported markets during the pandemic. A recent uptick in Delta variant Covid-19 infections has caused some investors to expect that the U.S. economic recovery may pause and cause the Fed to slow the reduction of easy-money policies.

"For now, the binding constraint of what they do is the labor market. That payroll is really the thing to watch in seeing how quickly we get through that labor market slack and approach actual rate hikes," said Hani Redha, a portfolio manager at PineBridge Investments.

Economists surveyed by The Wall Street Journal estimate that the U.S. economy added 720,000 jobs in August and that the unemployment rate fell to 5.2%.

Fresh figures on activity in the U.S. services sector for August are also due. Private data firm IHS Markit will release results from its survey of purchasing managers in the U.S. services sector and the Institute for Supply Management will release its services index later Friday.

Forex:

The dollar traded flat as investors turn cautious before the release later Friday of the U.S. nonfarm payrolls report for August, which could influence the Federal Reserve's decision on when it will start tapering asset purchases.

The market seems to have already priced in a slowdown in jobs growth in August, Unicredit analysts say. "Nonetheless, a lower number (we expect a 700,000 reading) may still drag the USD down further after the DXY index moved back below the August lows at around 92.50."

That could see EUR/USD rise above the key 1.19 level and GBP/USD rally further beyond 1.38, the analysts said.

The euro-dollar exchange rate's recent moves have been mainly driven by the U.S. currency's performance but the European Central Bank's policy decision on Sept. 8 might change that, Commerzbank said.

"Following some hawkish comments by individual ECB members, the market might look for signs that perhaps a larger number of ECB members might favor a reduction of monetary policy stimulus," Commerzbank currency analyst You-Na Park-Heger said.

That means the euro may start to contribute to moves in EUR/USD again next week, she said.

Earlier this week ECB policymakers Robert Holzmann and Klaas Knot suggested the bank could soon start tapering its pandemic bond-purchase program.

Bonds:

In bond markets, the yield on the 10-year Treasury note ticked up to 1.295% from 1.293% Thursday.

The ECB's communication at Thursday's meeting will aim to avoid misinterpreting an anticipated reduction in the Pandemic Emergency Purchase Programme as tapering, said Barclays' analyst Silvia Ardagna.

Barclays expects the ECB to announce a reduction in PEPP purchases for the fourth quarter due to an improved macroeconomic backdrop, along with an upgrade to growth and inflation forecasts, she said.

Barclays expects an announcement on the size of the regular Asset Purchase Programme for the post-PEPP era to come later in the fourth quarter, Ardagna said.

"We expect the ECB President will signal that the APP programme could be recalibrated if the PEPP ends in March 2022 and that, if needed, PEPP could also be extended beyond that date," she said.

Commodities:

Oil wavered around flat after the unexpectedly severe impact of Hurricane Ida prompted traders to buy, DNB Markets' Helge Andre Martinsen said.

With 1.7 million barrels a day of production capacity remaining offline on Thursday, "the crude oil inventory build caused by the hurricane could thus turn out to be more moderate than anticipated," Commerzbank's Carsten Fritsch said.

Investors have sold holdings in gold exchange-traded funds in the build-up to the U.S. jobs report due later.

Gold ETFs tracked by FactSet had outflows of approximately $185 million between Monday and Thursday, according to the data provider.

"ETF investors remain on the sidelines in the run-up to this important data publication and sold shares once again yesterday," said Daniel Briesemann at Commerzbank.

FactSet's data shows gold ETFs saw just one day of net positive inflows in July and August, but 19 days of net outflows. Gold price movements have been lackluster in recent weeks.

EMEA HEADLINES

European Regulators Continue to Disrupt Data Transfers to U.S.

Businesses transferring data from the European Union to the U.S. must provide new legal guarantees about data privacy starting this month, although privacy experts say the change won't solve all the challenges from regulators and courts regarding such transfers.

A new version of standard contractual clauses, widely used legal contracts preapproved by the European Union's executive arm, will be required for new business contracts that involve international data transfers starting Sept. 27.

Eurozone Retail Sales Declined in July as Spending Shifted Toward Services

Eurozone retail sales declined in July after rising the previous two months as the effect of stores reopening faded and consumer spending shifted toward services.

The volume of retail sales fell 2.3% over the previous month in July, while in June it rose by an upwardly revised 1.8%, the EU's statistics agency Eurostat said Friday. Economists polled by The Wall Street Journal had forecast a 0.2% rise for July.

Eurozone Services Sector Kept Momentum in August Despite Delta Variant Concerns

Eurozone's services sector continued to expand at a strong pace in August, signaling little economic impact from the Covid-19 Delta variant so far, according to a survey of purchasing managers.

The final reading for the eurozone's services PMI for August was 59.0, data from IHS Markit showed Friday. The reading is below the 59.8 registered in July and lower than the 59.7 preliminary estimate. A reading above 50 indicates an expansion an activity, while below this threshold signals a contraction.

Russia Threatens Apple and Google Over Alexei Navalny App

MOSCOW-Russia's state censor threatened to fine Apple Inc. and Google and accuse them of interfering in elections if they don't remove an app developed by supporters of jailed opposition leader Alexei Navalny, in what critics say is the latest attempt to stifle criticism ahead of a parliamentary vote next month.

The communications regulator Roskomnadzor said Thursday the app enabled Mr. Navalny's supporters to continue their campaigns after his Anti-Corruption Foundation was designated an extremist organization, banning it from operating in Russia. In August it ordered the tech giants to stop distributing the app on their stores, and said their failure to remove it could be viewed as interference in Russian elections, describing it as "a violation of Russian law."

EU to Return Millions of Doses of J&J's Covid-19 Vaccine Imported From Africa

The European Union will return to Africa millions of doses of Johnson & Johnson's Covid-19 vaccine that it received from a plant in South Africa, following criticism by health activists that the bloc was taking away shots from a continent that has the lowest immunization rate in the world.

Strive Masiyiwa, who heads the African Union's Vaccine Acquisition Task Team, said the decision to return the shots produced at Aspen Pharmacare Holdings Ltd. was made at a meeting between European Commission President Ursula von der Leyen and South African President Cyril Ramaphosa last week. As part of the deal, the EU will also not take doses from the Aspen plant it was expecting in September, Mr. Masiyiwa said.

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09-03-21 0611ET