A Day Ahead View in US and Global Markets by Mike Dolan
After a frantic week of G7 interest rate cuts, new record highs for stocks, another AI rush and a wave of elections, world markets froze awaiting the US jobs report.
The May payrolls report comes just before next week’s Federal Reserve meeting and most labor market updates in recent days have indicated a gradual cooling in employment.
For the record, consensus forecasts indicate that nonfarm payrolls growth increased slightly last month, to 185,000 from 175,000 in April — and the monthly increase in average earnings also rose to 0.3%.
But the unemployment rate is expected to remain at 3.9% and, if this continues, Deutsche Bank strategists point out, it will mark the 28th month below 4% – the longest period since the 1950s.
It would have to be a shock if recession alarms were going off and it would have to jump to 4.3% to trigger the oft-cited “Sahm rule”. Developed by former Fed economist Claudia Sahm, it suggests a recession warning sign if the three-month average unemployment rate rises half a point above the previous 12-month low.
But the cooler labor market seen this week in terms of weekly unemployment claims, falling job openings and contracting employment components in the services sector has already seen Fed rate cut expectations revived to two 0.25 point moves. percentage this year, starting in September.
And 10-year Treasury yields
The MSCI world stock index was flat ahead of the report after hitting an all-time high on Thursday, and Wall Street stock futures were flat before the bell.
Oil stabilized as OPEC+ members Saudi Arabia and Russia indicated a willingness to pause or reverse oil production increases, but oil was still heading for its third consecutive weekly loss on demand concerns.
China’s stocks were once again bearish and notably underperformed in Asia, although the country’s May export figures surpassed forecasts.
But, given global concerns about a new boost to Chinese exports to favor an economy that suffers from still fragile domestic consumption, the big concern is that import growth will slow down much more than expected, to just 1.8%, compared to the 8.4% jump in the previous month.
Chinese stocks were also hit by a report that U.S. lawmakers pushed to ban Chinese battery companies with ties to Ford and Volkswagen from exporting to the United States.
In Europe, stock markets retreated and the euro was slightly firmer after the European Central Bank released its long-telegraphed first rate cut on Thursday – but it sowed some doubts about the extent and speed of further easing. from here.
Markets do not expect another cut before September.
And after the artificial intelligence boom reignited again this week, with Nvidia hitting new highs and surpassing a $3 trillion market capitalization, attention was now on how the company’s shares would react to Nvidia’s pre-announced stock split. today.
Nvidia fell 1% on Thursday, returning to the world’s third most valuable company a day after jumping ahead of Apple to take second place.
Top daily items that could guide US markets later on Friday:
* US employment report for May, consumer credit for April; Canada May Employment Report
* European Central Bank President Christine Lagarde speaks
(Reporting by Mike Dolan, Editing by Tomasz Janowski mike.dolan@thomsonreuters.com)
