Will today’s jobs data offer support to the markets? The equity market rout unleashed by the Administration’s tariff gambit has diverted all attention away from perhaps the most significant monthly economic release.
Goldman Sach stated that hedge funds have dumped stocks at the greatest rate in 12 years during March, the result of unknown tariff policy.
A case can be made that if the data differs from consensus selling might continue. If the data is too weak, questions about the economy’s strength might be front and center. Conversely if the data is too strong, questions about the pace of monetary policy could soon again arise.
Analysts are expecting a 140k and 135k increase in nonfarm and private sector payrolls, a 4.1% unemployment rate, a 0.3% increase in average hourly earnings, a 34.2 hourly work week and a 62.4% labor participation rate.
Yesterday the Bloomberg Dollar Spot Index fell 2.1%, the sharpest decline since its launch in 2005. Is the Administration using tariffs to devalue the currency which hypothetically would make US products more competitive abroad and imports more expensive?
Most were taught that the US supports a strong dollar, the result of the massive US deficit. A cheaper dollar makes it more expensive (i.e. higher yield) to fund our debt via international buyers.
It must be noted; however, foreign buying of the US Treasury has waned considerably over the past five years for a myriad of reasons including demand for monies from most developed nations and from that China has used a large majority of its surpluses to fund its Belt and Roads initiative in sub-Saraha Africa.
Many believe that Wednesday was only an opening salvo of negotiations, and the outcome could be considerably different. However, the markets hate uncertainty, and most will agree uncertainty about global trade is perhaps at the greatest level in years.
A Wall Street Journal headline read “With New Trade Regime, US Aims to Topple the Age of Globalization.”
Last night the foreign markets were down. London was down 4.25%, Paris down 4.74% and Frankfurt down 5.79%. China was down 0.24%, Japan down 2.75% and Hang Seng down 1.52%.
Futures are down almost 4% as China has retaliated with a 34% tariff on all US goods. Will the 8:30 data influence the opening? Also, FRB Chair is speaking today. Will he comment about the tariffs and/or monetary policy?
The 10-year is up 1 ¼ points to yield 3.89%. The 2-year is around a 3.5% yield as the market is now pricing in four interest rate cuts and a 50% probability of a fifth. The yield curve has steepened considerably.
