A look at the day ahead in markets from Dhara Ranasinghe.
When the blue-chip Dow Jones index slides more than 1,000 points on one day, U.S. Treasury yields jump as much as 20 basis points and Britain’s pound drops more than 2%, you’d be forgiven for thinking that investors have gone into a sell everything mode.
But with the safe-haven dollar at 20-year highs, there was at least one asset benefiting from Thursday’s market mayhem.
For sure, waters seem calmer as European trading gets underway, although Asia shares slumped overnight.
Having breathed a sigh of relief that the Federal Reserve didn’t opt for a massive 75 bps rate hike at this week’s meeting, in a change of mind investors fretted that aggressive rate hikes – like the 50 bps move the Fed delivered – could trigger a sharp economic slowdown or recession.
Adding to the volatility was a surge in U.S. real or inflation-adjusted bond yields, which rose to their highest since early 2020.
The Bank of England warning of recession risk and inflation rising above 10% only exacerbated concerns about the growth outlook, sparking the biggest one-day drop since March 2020 (and we all remember why that month stands out, right?)
Given that it’s non-farm payrolls day in the United States, Friday’s trading session may not bring a quiet end to the week.
Economists polled by Reuters predict the U.S. economy created a solid 391,000 new jobs in April, versus 431,000 a month earlier.
The unemployment rate is expected to fall to 3.5%, which would make a pre-pandemic low.
The jobs data, alongside next week’s U.S. inflation data , should help frame the debate over the Fed policy outlook.
Key developments that should provide more direction to markets on Friday:
– Tokyo consumer prices rise at fastest pace in 7 years
– ECB must quickly raise key rates, says head of Germany’s Ifo institute –
– Swedish Central Bank minutes
– Federal Reserve Bank of New York President John Williams
– U.S. non-farm payrolls
– Brazil April CPI
– European earnings: Adidas, IAG, Amadeus, Intesa San Paulo, Beazley
– U.S. earnings: CIGNA, Goodyear
(Reporting by Dhara Ranasinghe, editing by Karin Strohecker)