Market movers today
The data calendar today is rather thin in volume terms, but an important release comes from the US.
The US jobs report is due at 14:30 CET. As employment continues to rise, the main focus is on average hourly earnings, as many economists are st ill puzzled about why wage growth (and inflation) remains subdued, given that the labour market has tightened substantially. We estimate average hourly earnings rose 0.2% m/m in April, in line with the recent t rend, implying an unchanged annual growth rate of 2.7% y/y. We expect employment growth to rebound from the weak print of 103,000 in March to around 200,000 in April. We would not be surprised to see a decline in the unemployment rate from 4.1% to 4.0%, as employment growth remains higher than labour force growth.
In Sweden Service PMI and industrial orders are up for release, see page 2.
Selected market news
Stock markets continue to trade on the soft side with markets awaiting the labour market report today and the outcome of the US-China trade talks. Bond yields traded lower yesterday after Euro area inflation for April surprised to the downside with core inflation falling to 0.7% y/y (expected 0.9%), see Flash Comment: Easter effects weighing on Eurozone inflation in April, 3 May 2018.
The US-China trade talks in Beijing are proceeding today. So far little news has come out but US Treasury Secretary Stephen Mnuchin yesterday said US and China had ‘very good conversation on trade’. The US is probably presenting a list of demands from China, but it seems unlikely that everything will be resolved with this trip. US Trade Representative Robert Lighthizer yesterday said ‘We’re going t o spend t he next year developing how we deal with each other’ suggesting the talks is just the start of a longer process of solving the trade dispute.
The expected Bank of England hike next week may very well be delayed after UK service PMI for April disappointed yesterday. The index recovered only slightly (from 51.7 to 52.8, consensus 53.2) after a sharp drop in March. US ISM non-manufacturing also disappointed somewhat yesterday falling from 58.8 in March to 56.8 in April. It is still a high level but underlines that the cycle is losing a bit of momentum currently as also witnessed by the drop in ISM manufacturing on Tuesday.
Argentina yesterday lifted rates to 33.25% in a defence of a steep drop of the peso. The Turkish lira has also come under pressure and EM assets are trading soft in general.