Here are the latest developments in global markets:
- FOREX: An escalation in the trade war between the United States and China, as well as investor caution ahead of today’s US jobs report led the US dollar to give up some of its earlier advance when it hit a 5-week high against a basket of currencies. The dollar index eased to 90.40 by mid-European session, while the greenback was flat versus the yen around 107.35. The euro managed to regain some positive footing to climb to $1.2243 after earlier falling to a one-month low of $1.2212 following worse-than-expected industrial output figures out of Germany for February. The pound also recovered, clawing its way back above the $1.40 level, having slid to a 2½-week low yesterday after a much weaker-than-expected UK services PMI. Commodity-linked currencies remained in the red as trade tensions brewed. The aussie was last down 0.1% at $0.7677 and the loonie was 0.3% weaker at C$1.2781 per US dollar. The kiwi was the biggest loser, falling by 0.4% at $0.7244.
- STOCKS: European stocks were down sharply on Friday but losses were contained to under 1%. The mid-week bounce in risk appetite was dampened today after President Trump threatened to impose additional tariffs of up to $100 billion on Chinese products following China’s “unfair retaliation”. The latest US move was met with defiance by China, which vowed to fight back “to the end, and at any cost”. The heated words sent the EURO STOXX 50 index down by 0.6%, led by losses in Germany and France. UK shares outperformed though, with the FTSE 100 slipping just 0.2%. US shares weren’t immune to the latest escalation, with e-mini futures pointing to around 1% losses for the Dow Jones, S&P500 and Nasdaq Composite.
- COMMODITIES: The safe-haven gold didn’t seem to benefit from the rise in risk aversion on Friday. Gold prices were last trading slightly down at $1323 an ounce, not too far from a 2-week low set earlier in the day. Oil prices remained weighed by the heightened trade concerns, with WTI and Brent both trading near their intra-day lows at $63.07 and $67.90 a barrel respectively.
Day ahead: NFP report and Powell speech awaited
March’s nonfarm payrolls report will dominate markets’ attention in the US session today, with traders hoping that a strong labour market and subdued wage growth will give them a reason to cheer amid growing trade war risks. The US economy is expected to add 193k jobs in March, down from February’s robust 313k figure but still an impressive number. Average hourly earnings are forecast for a 0.2% month-on-month growth. This would take the annual rate to 2.7%, up from last month’s 2.6% rate.
A stronger gain in wages could upset markets at a time when investor angst is high against a backdrop of increasing US protectionism. Should the jobs report raise concerns of an overheating labour market, expectations could rise again that the Fed will probably raise rates four times this year rather than the currently priced number of three.
In the event of an NFP-induced volatility, Fed Chair Jerome Powell will have the chance to calm markets when he addresses the Economic Club of Chicago at 17:30 GMT. Investors will likely be watching for any signs of a hawkish tilt in Powell’s speech on the economic outlook and whether or not his views have altered since the March policy meeting following the growing trade dispute between the US and China.
The Canadian dollar will also be in focus today as job figures are released in Canada too. Employment in Canada is forecast to rise by 20k in March, up from 15.4k in the prior month. The unemployment rate is expected to hold steady at 5.8%. A stronger-than-anticipated employment report could push the loonie to fresh highs, taking it closer to the C$1.27 level. The Canadian dollar hit a one-month high of C$1.2740 to the greenback yesterday, getting a lift from comments by Canadian Prime Minister, Justin Trudeau, who said talks between the US, Canada and Mexico were “moving forward in a significant way”.