US ADP payrolls in view

• Oil stocks gain on Iran-Israel concerns.

• Chinese stocks continue to outperform.

• US ADP payrolls in view.

European equity markets are on the rise in early trade, seemingly happy to ignore the growing risk of a major Middle East conflict between Israel and Iran. Oil prices are heading higher as a result, with Brent Crude on track for its best week since February. Unsurprisingly, the heavily commodity-focused FTSE 100 has enjoyed the benefits of rising oil prices, with Shell and BP both pushing higher in anticipation of a potential conflict that could impact the production and transit of oil in the region.

Chinese stocks continue to power on higher, with the recent stimulus measures from the PBoC marking the starting gun for many to become overweight stocks in the region. The Hang Seng Index enjoyed another 7% bump, rising for the 13th consecutive session. With mainland markets closed until October 7, asset managers took this opportunity to jump on board while they can. Notably, we have seen strength for property stocks, highlighting growing confidence in a sector that will need to be the backbone of any recovery for the Chinese economy. With tech, financials, and consumer stocks also on the rise, markets clearly view the recent PBoC stimulus measures as an indication that we could finally see the country turn a corner.

Today sees markets increasingly shift their focus towards the jobs market, with the release of the ADP payrolls figure coming in the wake of yesterday’s surprise rise in job openings. The ISM manufacturing PMI sent yet another warning signal over the weakness of hiring in the sector, with the employment metric falling back down from 46.0 to 43.9. However, with new orders or the rise, and prices collapsing to 48.3, there were certainly some reasons to be cheerful this month. The JOLTS report brought a surprise surge in openings, with the 8.04M figure reversing the declines of recent months. While layoffs remain low, we are also seeing a low level of quits as workers seek to maintain stability throughout a period where jobs have become increasingly scarce. The ADP payrolls figure provides yet another opportunity to weigh up whether a 50bp rate cut is justified or not, with predictions of another sub-100k figure highlighting the shift following a 2023 that failed to see a single reading below that threshold.