Joshua Mahony MSTA
Scope Markets
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European markets struggle for direction.
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TSMC earnings highlight strong demand for AI stocks.
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US jobs report set to dominate.
A mixed start in Europe has seen indices largely treading water on a day that will be dominated by a US jobs report that poses a fresh risk in the face of growing inflationary concerns sparked by Tuesday’s ISM services PMI report. In Europe, the surge in borrowing costs has hurt sentiment as traders weigh up the economic and budgetary implications of continued upside in yields. For the FTSE 100, the weakness of the pound has helped lift valuations as the FTSE 250 bears the brunt of the selling pressure once again today. However, much of the upside in borrowing costs does come down to the prospect of an inflationary push in the US under Trump, highlighting the importance of US economic data such as today’s NFP for European markets and borrowing costs.
US earnings season kicks off with the big banks next week, but the data from global chip manufacturing giant TSMC brought a welcome boost for sentiment around the AI trade overnight. With the world’s largest chip manufacturer topping estimates for fourth-quarter revenues which came in at 868.5 billion New Taiwan dollars (up 38.8% year-on-year), all eyes will be on the US tech giants at the open given the positive implications for the likes of Apple, AMD, Nvidia, Qualcomm, and Broadcom.
Looking ahead, today will be dominated by the latest jobs report, as traders hope to see things cool down from a bumper 227k figure that raised concerns over a potential overheating of the economy even before Trump takes office. Markets will be watching closely for any signs of inflationary pressures building with the wage growth figure followed closely. The dollar is the clear-cut play when it comes to the data right now, with the dollar index currently on course of a sixth consecutive week of gains that have taken it into a two-year high. With both wage growth and payrolls expected to pull back, such a move could help lift equities as we head into the weekend.
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