The SET index sold off 1.18% on Friday, to close at 1,521.48, ahead of the U.S. nonfarm payrolls reports for August, as Thai institutions were dumping shares, according to the SET market data. The Thai stock market has shown signs of topping in late August and could face some further downside risks heading into the volatile month of September. For the week, the index tumbled 1.80%, along with crude oil prices.

Investors were also selling the Thailand 10-year government bond, sending the yield up 9.48% for the week, to close at 2.31% on Friday. The yield spread between the Thailand 10-year bond and the benchmark U.S. 10-year Treasury Note, yielding at 1.608% on Friday, widened to a year-to-date high of 0.702 percentage points.

Two important economic data reports that the Fed depends upon, nonfarm payrolls and core personal consumption expenditures (PCE), were released this week. One may want to pay attention to both reports, as the SET index is now highly correlated with the S&P 500, with the correlation coefficient between the indexes at +0.94, over the 100-day period.

The U.S. Bureau of Labor Statistics (BLS) said on Friday that U.S. total nonfarm payrolls increased by a seasonally adjusted 151,000 jobs last month, missing Wall Street economists' forecast of an 180,000 gain. Both the U-3 and U-6 unemployment rates remained at 4.9% and 9.7%, respectively. The total nonfarm payrolls growth reflects the weak U.S. GDP for the first-half 2016, which was below 1%, due in part to the Fed rate hike in December 2015. 

The U.S. Bureau of Economic Analysis (BEA) said on Monday that core PCE, excluding food and energy, the Federal Reserve primary inflation gauge, came in at 1.57% in July on year-on-year basis, down from a 1.59% increase in June and a 1.64% gain in May. Both sets of data were weak, as the nonfarm payrolls data shows signs of slowing down and the core PCE index is still running below the Fed’s target of 2%.

The probability of a 25 basis point rate hike at the next FOMC meeting on September 21 dropped 3 percentage points, to 21.0%, after the release of the employment situation report on Friday, while the probability of a no change in monetary policy rose to 79.0%, based on the CME Group 30-day Fed Fund futures prices as of September 2.

The Commerce Ministry of Thailand said on Wednesday that the customs-cleared exports data in July showed a 6.38% contraction year-on-year, compared to the 4.4% drop previously reported, according to the Bangkok Post. Last week, the ministry reported that exports fell for the fourth straight month in July, with the contraction widening to 4.4% year-on-year.

The USD/THB exchange rate was quoted at 34.63 baht per dollar on Friday, practically unchanged for the week, while the THB/JPY printed at 3.003 yen per baht, up another 2.22% for the week. The USD/THB technical resistance is at 34.74 baht per dollar, or 23.6% Fibonacci retracement, while the THB/JPY technical resistance is at 3.07 yen per baht. 

The WTI crude spot price tumbled another 6.72% for the week, to close on Friday at $44.44 per barrel, while Brent crude tanked 6.24% to close at $46.61 per barrel, after a Reuters survey showed on Wednesday that OPEC's oil output in August is likely to set another record high, as extra barrels from Saudi Arabia and other Gulf members make up for losses in Nigeria and Libya. 

According to OilPrice.com, OPEC increased their crude production in August by 40,000 barrels per day (bpd) over July to a record-level of 33.5 million bpd. The crude prices, however, bounced off an intra-week low on Friday after Russian President Vladimir Putin called on oil producers to agree to limit output when OPEC members meet in Algeria on September 26.

The EIA weekly U.S. oil inventory report on Wednesday showed an increase of 2.3 million barrels to 525.9 million barrels, excluding the Strategic Petroleum Reserve, in the week ending August 26, compared to S&P Global Platts analysts’ expectations for a rise of 600,000 barrels. The American Petroleum Institute (API) inventory data on Tuesday showed a U.S. crude inventory build of 940,000 barrels for the week. 

Separately, the EIA said the weekly U.S. crude oil production decreased by 60,000 bpd for the week ending August 26, 2016, to 8.488 million bpd. Weekly U.S. crude oil output has fallen about 11.68% from the peak level of 9.61 million bpd during the week ending June 5, 2015. Houston-based oilfield services company Baker Hughes Inc. said on Friday that the U.S. oil rig count rose by 1 to 406, compared to 316, when the rig count hit the low on June 6, 2016. 

THAILAND SET INVESTMENT RESEARCH