US jobs in focus, with unemployment claims setting us up for tomorrow's jobs report

European markets are enjoying an upbeat start to the trading day, with the FTSE 100 being lifted by financials and the miners. This week has brought a shift in sentiment around commodities, with the push into expansion for Chinese, US, and UK manufacturing PMI surveys bringing significant upside for silver and copper. The prospect of an improved environment for manufacturing and commodities does bring significant optimism for European indices, with traders looking increasingly confident that the economy could improve just as the central banks start to kick off their first rate cuts in June.

While the start of the week has been driven by sentiment around the manufacturing sector, we have since turned our attention to the services sector, with yesterday’s US ISM services PMI unexpectedly falling back to 51.4. However, the big boost came off the back of a collapse in the prices paid metric, which collapsed from 58.6 to 53.4. This represented the slowest growth in service sector price growth since early 2000, helping to allay fears that the services sector will continue to put upward pressure on prices.

In Europe, gains across Spanish, Italian, French, German, and eurozone services PMI readings helped lift the outlook for growth in the region. For the UK, while we saw a downward revision to the March services sector PMI, the impressive 53.1 figure wraps up a first quarter that looks highly likely to have dragged the economy out of its recession. With manufacturing now in expansion territory, the continued services sector expansion provides confidence that we are geared up to exit this ‘soft-landing’ phase.

US jobs remain in the limelight today, with markets gradually gearing up for tomorrows US jobs report. Yesterday’s comments from Jerome Powell sought to walk the tightrope, highlighting the Fed’s view that there are risks to cutting rates too late and too soon. In any case, the Fed are likely to remain relatively data-led, with yesterday’s decline in the services sector prices paid metric helping lift hopes of a June rate cut. With inflation the clear concern, tomorrow’s average earnings data will likely provide the most relevant data point to follow. Yesterday’s ADP beat highlighted the continued strength within the US economy, and today’s unemployment claims data will likely signal a similar resilience given how we have seen prices remain low in spite of the Fed’s monetary tightening.