Jobs Day Rounds Out A Busy Week

N.B. – No note on Monday due to a UK bank holiday, back to normal from Tues 6^th May

WHERE WE STAND – Short & sweet this morning as another busy trading week comes to an end here in a sun-bathed City of London.

The sun seemed to be shining on financial markets yesterday, as well, with stocks gaining ground across the board, as participants continue to climb the ‘wall of worry’ in very adept fashion. A somewhat cooler, and calmer, tone on tariffs, coupled with earnings season evolving in a more optimistic fashion than expected, has helped to boost market optimism at large. There is also a growing body of thought that we are at, or passed, the peak when it comes to noise on the tariff front, even if concrete progress towards deals remains lacking.

There are, of course, still numerous reasons for caution – those strong earnings don’t reflect developments since ‘Liberation Day’, economic data is likely to soften significantly over the next quarter or so as headwinds mount, while a tariff tape bomb could be lurking right around the corner at any moment. Still, equity momentum is clearly with the bulls for the time being, and even though I fear markets are being lulled into a bit of a false sense of security at this stage, the upside is becoming increasingly difficult to fade. Maybe the first trade deal announcements will pan out as big old ‘buy the rumour, sell the news’ reaction.

Elsewhere, conditions were uber-thin for the most part, with the bulk of European markets closed for Labour Day, leaving us plucky Brits to hold the fort! Not that there was much holding to be done, mind, with fundamental drivers distinctly lacking.

We did, at least, get the latest ISM manufacturing survey out of the US, which printed a better than expected, albeit still dire, 48.7, as the trend of ‘soft’ data rolling over substantially continued. While downside risks are obvious, we still await the stage when comparable ‘hard’ data will also roll over, though that surely can’t be too far away at this stage.

Besides that, a dovish hold from the BoJ cast doubt on the idea of further hikes any time soon, in turn sending USDJPY up through the top of the recent range at the 145 figure, which puts JPY bears in command for the time being, even if the yen remains one of few havens in the current environment.

On that note, gold traded softer yesterday amid the improvement in risk appetite, though the dip down to $3,200/oz is one I remain happy to buy into, with the bull case for the yellow metal still firmly intact amid a volatile Trump Administration and slowing US economy.

LOOK AHEAD – Happy Jobs Day!

The April US labour market report drops later on, with headline nonfarm payrolls set to have risen +135k last month, earnings seen holding steady at 0.3% MoM, and unemployment also set to remain unchanged at 4.2%. Leading indicators for the print give little overall steer, given the cloudy nature of the economic outlook, though risks for markets are asymmetrically skewed to the downside. A solid report will be a case of ‘slowdown delayed’, as opposed to averted entirely, while a cool slate of data would crystallise recession fears.

Besides that, a few eurozone releases are due this morning, with the latest ‘flash’ CPI figures highlighting the docket. Headline inflation is seen cooling to 2.1% YoY, though no matter the figures, another 25bp ECB cut in June is nailed on. Meanwhile, the US gives us March factory orders later this afternoon.

Then, time for a cold drink in the sun, and a (hopefully) relaxing long weekend!