Morning Bid: Geopolitics, oil and payrolls make for a busy day
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[April 05, 2024] A
look at the day ahead in U.S. and global markets by Alun John.
It is an unusual start to a first Friday of the month as, with Brent
crude oil above $90 a barrel and driving a risk-off tone in markets
around the world, investors are not solely thinking about U.S. non-farm
payrolls.
Let's not overstate it. They still are thinking a lot about the
always-crucial jobs data, due at 0830 ET (1330 GMT), but after all three
main U.S. stock indexes fell by over 1% on Thursday, while Treasuries
rallied, it is not the only thing on their minds.
Overnight chin-stroking has pinned the blame for the risk-off tone on
Brent crude, which settled at over $90 dollars a barrel on Thursday for
the first time since October on developments in the Middle East. It is
holding above that level in the European morning.
Israel is bracing for the possibility of a retaliatory attack for
Monday's presumed Israeli air strike on an Iranian embassy. Israel has
not claimed responsibility for the attack on Iran's embassy compound in
Syria, which killed high-ranking Iranian military personnel.
Asian and European shares both traded around 1% lower on Friday. S&P
500, Nasdaq and Dow Jones futures are all up about 0.2% suggesting a
more stable open, though the S&P 500 is still down 2% on the week,
which, if sustained, would be its biggest drop since October.
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Also taking some blame for Thursday's fall were hawkish remarks from
policymakers including Minneapolis Federal Reserve Bank President Neel
Kashkari who said that at the Fed's meeting last month he penciled in
two interest rate cuts this year but if inflation continues to stall,
none may be required by year end.
High oil prices won't help the inflation fight.
Nonetheless, the 10-year Treasury yield dropped nearly 5 basis points on
the day, as the geopolitical jitters sent investors to the safe-haven
asset.
PAYROLLS
And then there are non-farm payrolls, which are expected to show U.S.
jobs growth slowed moderately in March to 200,000 new jobs, while wage
gains remained elevated.
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![](../images/040524PIX/busine70.jpg)
Oil rig pumpjacks, also known as thirsty birds, extract crude from
the Wilmington Field oil deposits area near Long Beach, California
July 30, 2013. REUTERS/David McNew//File Photo
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As well as March's number, investors are also watching out for
revisions to previous month's data, as past changes have been
significant - Treasury yields fell a month ago after February's jobs
report, partly because it revised down January's stonking figure of
353,000 jobs to 229,000.
Friday's data is also expected to show the unemployment rate
remaining below 4% for 26 straight months, the longest such stretch
since the late 1960s.
The data will be important as it comes at a time when investors
getting a bit jittery about whether the Federal Reserve will cut
rates in June.
We've seen this movie before, as both March and May were once seen
as the Fed's start date. Friday's data and next week's U.S. CPI will
help decide whether June will go the same way.
This could cause some ructions in markets, particularly in Japan
where authorities' threats to intervene directly in currency markets
to prop up the weak yen have left the dollar unable to break past
the 152-yen level, which traders see as something of a line in the
sand.
"The risk is that today’s U.S. payrolls report pushes USD/JPY
sharply higher which in turn triggers an actual intervention from
Japan’s Ministry of Finance," said currency analysts at Commonwealth
Bank of Australia in a note.
Key developments that should provide more direction to U.S. markets
later on Friday:
* U.S. March non-farm payrolls
* Canada March jobs data
(Reporting by Alun John; Editing by Toby Chopra)
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