After a hectic week of G7 rate cuts, new record highs for stocks, a new rush in artificial intelligence and a flurry of elections, global markets are frozen in anticipation of the US jobs report.
The May jobs report comes just ahead of next week’s Federal Reserve meeting, and most labor market updates in recent days have pointed to a gradual slowdown in employment.
For the record, consensus forecasts indicate that nonfarm payrolls growth accelerated slightly last month, from 175,000 in April to 185,000, and that the monthly increase in average wages also edged up to 0.3%.
But unemployment is expected to remain at 3.9%, and if it holds, Deutsche Bank strategists point out, it will be the 28th month below 4% – the longest such period since the 1950s.
It would take a shock for recession alarm bells to ring, and it would take unemployment rising to 4.3% to trigger the oft-cited “Sahm Rule.” Developed by Claudia Sahm, a former Fed economist, this rule indicates a recession warning signal if the three-month moving average of the unemployment rate rises half a point above the lowest level of the previous 12 months.
But the cooling in the labor market seen this week in weekly jobless claims, declining job openings and falling service sector employment components has already revived expectations for a reduction in the Fed interest rate to two quarter-point moves this year, starting in September.
Yields on 10-year Treasuries < US10YT=RR are at a two-month low and the dollar is in decline, near its lowest levels in eight weeks.
MSCI’s global stock index was flat ahead of the report, after hitting a record on Thursday, and stock futures on Wall Street were flat before the bell.
Oil steadied as OPEC+ members Saudi Arabia and Russia signaled they were willing to suspend or reverse oil production increases, but crude was still on course for its third straight weekly loss on concerns about demand.
Chinese stocks again showed gloomy mood and were one of the biggest underperformers in Asia, even though the country’s export figures for May came in better than expected.
But amid global concerns about a new surge in Chinese exports to flatter an economy suffering from still-fragile domestic consumption, the biggest worry is the much-bigger-than-expected slowdown in import growth to just 1.8% against a jump of 8.4% the previous month.
Chinese stocks were also hit by a report that US lawmakers were pushing to ban Chinese battery companies linked to Ford and Volkswagen from exporting to the US.
In Europe, stock markets fell and the euro strengthened slightly after the European Central Bank made its long-awaited first interest rate cut on Thursday, but cast doubt on the extent and speed of further easing.
Markets do not expect a further decline before September.
After the artificial intelligence boom roared back this week, with Nvidia hitting new highs and surpassing a $3 trillion market cap, attention turned to how the company’s stock reacted to the stock split announced today.
Nvidia fell 1% on Thursday to once again become the third most valuable company in the world, the day after it overtook Apple to take second place.
The main items on the agenda that could guide US markets later on Friday: * May US employment report, April consumer credit; May jobs report in Canada; speech by Christine Lagarde, President of the European Central Bank.
