Market movers today
Today, the US jobs report for May is due, one of the last important data releases ahead of the Fed’s meet ing later this month. We forecast nonfarm payrolls rose 170,000 in May but note the ADP report released yesterday showed a stronger increase of 253,000. The Markit PMI employment index suggests slower growth of around 100,000. Weestimate the unemployment rate increased from 4.4% to 4.5%, as labour force growth was weak at the end of 2016 and in the beginning of 2017 and we think we could see some reversion. We estimate average hourly earnings rose +0.2% m/m, implying an unchanged annual growth rate of 2.5% y/y.
In the UK, we are scheduled to get const ruction activity for May.
In Norway, we are due to see NAV unemployment data, to which we assign greater importance than to Labour Force Survey (LFS) data. We expect the NAV measure to show a fall in the jobless rate to 2.6% in May, with gross unemployment down 500 people m/m. In Denmark, we get numbers for currency reserves and unemployment data.
Selected market news
The decision by Donald Trump to withdraw from the Paris climate accord was the main story in the global media yesterday night . The direct impact on financial markets is limited but it does highlight that Trump is serious about his election promises. Overnight, the Trump administ ration has asked the Supreme Court to the restore the travel bank. Hence, focus could potentially now turn to the different trade agreement deals that Trump has promised to withdraw from and issues such as border tax and in this way dent investor optimism more seriously.
However, for now, risk appetite is intact , especially as the US numbers cont inue to be strong, point ng to an accelerat ing growth rate following the somewhat disappointing growth in Q1.
The ADP employment report showed an increase in employment of 253,000 persons in May. It points to a strong non-farm pay-rolls report later today, though the predictive power of the ADP report is certainly not one-to-one. Hence, we stick to our 170,000 call. Also, the ISM report came out on the strong side, with a reading of 54.9, up a notch from 54.8 in April. Note that some details, such as business and government construction spending, were on the weak side.
The major US equity indices ended the day up by 0.7-0.8%, reaching all-time highs. The positive sentiment has been carried over to Asia, where the Nikkei was up 1.7% at the time of writing. Nikkei has topped 20,000 for the first time since 2015. Despite the strong risk appetite , the impact on the US treasury market was very limited, with the benchmark yield only marginally higher. This may reflect the market now being more or less fully priced for a June Fed hike.
