US jobs data expected to deteriorate

This morning has seen another upbeat start for financial markets in Europe, with the positive close for US indices helping to maintain the cheery sentiment despite the looming data-led volatility. For the UK markets, a 10% rise in HSBC profits for the quarter saw the biggest UK-listed bank rise 5% to the benefit of the FTSE 100. For UK traders, the attention will soon turn to the impending budget announcement, with the chancellor seeking to hit businesses and investors alike in a bid to shore up the public finances. Notably, despite the negative impact it will likely have on businesses, we have seen the pound hit multi-month highs against the euro, yen, Australian and New Zealand Dollar of late. With the government expected to tap the debt market thanks in part to a likely change in the calculations used to just their fiscal headroom, there is a hope that the government’s investment will help boost growth despite near-term concerns about taxation.

Today sees the first of the US jobs data released, with markets expecting to see signs of deterioration that could counteract the gains seen last month. The JOLTS job openings metric has been on the slide for over two-years now, and markets are expecting more of the same despite a surprisingly strong 8.04M figure last month (biggest beat this year). However, it is the downbeat expectations for the ADP payrolls (110k from 143k), and non-farm payrolls (108k from 254k) which highlight the potential for concerns to reemerge over the course of the week. With the rising US treasury yields grabbing everyone’s attention, markets will be watching closely given the impact this rise in borrowing costs could have on the Fed’s monetary policy plans.

Today marks the beginning of a massive three-day period which sees five of the Magnificent seven report earnings, with Alphabet numbers due after the US close. Much has been made of the rampant front-loaded spending on AI from these tech giants, and it will once again be a case of watching out for outgoing investment levels set against potential incoming revenues as they start to take advantage of this new technological shift. Nonetheless, advertising remains the name of the game for Alphabet, and the company will hope to capitalize on strong political spending at this crucial period in the US.