Europe
European stock markets are feeling the pinch this afternoon on account of the US non-farm payrolls update. The trading day started out firmly in the red as traders were spooked by President Trump’s threat of slapping tariffs on $100 billion worth of Chinese imports. It was the latest shot fired in the trade war between the two countries. Dealers are getting used to the volatile swings in global stock markets, and seeing as trade disputes tend to drag on, we could see this play out for some time.
Metals like copper are under pressure from the tensions between the US and China, and in turn mining stocks like BHP Billiton (LON:BLT), Antofagasta (LON:ANTO) and Rio Tinto (LON:RIO) are in the red. Traders are also mindful of the CPI and PPI figures that are due out of China next week, and seeing as PPI has been in decline, it suggests that demand at factory level is weak.
Next (LON:NXT) and M&S (LON:MKS) shares are lower today after they were downgraded by Citigoup. The US bank gave a less than rosy outlook for the British retail sector.
US
Stocks are offside after the latest non-farm payrolls report left traders disappointed. Adding to the selling pressure is the trade war between the US and China.
The latest US non-farm payrolls report caught investors off guard when the headline figure was well below estimates. In March, the US added 103,000 new jobs, and the consensus was for 193,000 jobs to have been created. The February figure was revised to 326,000, from 316,000. Unemployment ticked up to 4.1% from 4%. Average earnings rose by 0.3% and 2.7% on a monthly basis and yearly basis respectively.
As a standalone report, it wasn’t great. But when you take into consideration the very strong headline figure last month, it averages out. It is now looking less likely that the Federal Reserve will hike interest rates four times this year; however, two more interest rate hikes from the US is still potentially on the cards, given the state of the US economy.
FX
The US dollar index hit a one-month high this morning, but then sold off heavily in the wake of the US jobs report. Traders were half looking for an excuse to take some money off the table and the not-so-hot US data gave them a reason. EUR/USD and GBP/USD gained ground on the back of the soft greenback. The Federal Reserve will reveal the minutes to last month’s meeting on Wednesday, and traders will get a better idea as to what the US central bank is thinking.
Commodities
Gold was given a lift by the soft US dollar. The inverse relationship between the two markets is holding up, and even though there are concerns about the economic conflict between the US and China, it is the greenback that is having the biggest influence. The gold market is still fairly range-bound and we would need to see a break above $1,350 or below $1,300 before traders get excited.
WTI and Brent Crude have been selling off recently as traders are worried about how the trade war between the US and China plays out. Protectionist policies often have a negative impact on growth and the view is that global demand might soften should the trade war intensify. Oil is under pressure at a time when US oil and gas stockpiles are falling, which indicates how worried traders are.
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