Morning bid: May rescued by jobless jump, BoE shift, HK surge
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[May 10, 2024] A
look at the day ahead in U.S. and global markets from Mike Dolan
World stock indexes have shaken off a month of doubts to come back
within 0.5% of record highs on signs of a loosening U.S. labor market,
falling European interest rates and another Hong Kong surge.
Wall Street's wobble appears to be over, with the S&P 500 jumping on
Thursday to its highest close since April 1 on an unexpected jump in
weekly jobless claims that re-stoked Federal Reserve easing
expectations. And futures extended those gains ahead of Friday's bell.
The returning calm was evident in subsiding volatility gauges, with the
VIX 'fear index' closing on Thursday at its lowest since January and the
MOVE index of Treasury volatility ebbing to near 6-week lows too.
With Fed futures now 90% priced for a quarter-point U.S. interest rate
cut by September and a decent 30-year Treasury auction completing a
heavy week of new debt sales without much trouble, Treasury yields edged
lower.
San Francisco Fed chief Mary Daly on Thursday claimed she was still in
"wait-and-see mode" but added: "We've had three stubborn months of data,
but I still see monetary policy is working ... I do think that we're
seeing, in a really positive way, disinflation."
The global picture was also lifted by Thursday's indication from the
Bank of England that its policymakers were shifting tack to join the
European Central Bank in a likely first rate cut as soon as next month -
adding to cuts already seen in Switzerland and Sweden this year.
With money markets now seeing a 50-50 chance of a June BoE move, 10-year
British government bond yields fell to their lowest level in a month on
Friday.
Encouraging for both the ECB and BoE is the fact that diverging from the
Fed trajectory has not significantly weakened either the euro or
sterling in the process.
![](http://archives.lincolndailynews.com/2024/May/10/images/ads/current/qualityinn_sda_PROMGRAD_2024.png)
Minutes from the ECB's most recent meeting will be watched closely later
today.
The pan-European STOXX 600 climbed almost 1% on Friday to an all-time
high, with Germany's benchmark also touching a new record.
The macro picture is far from crystal clear, however.
Data released on Friday showed Britain's first-quarter economic growth
bounced back stronger than many had expected and the Atlanta Fed's
closely-watched U.S. real-time GDP estimate is tracking growth back
above 4% - despite economic surprise indexes at their most negative in
more than a year.
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![](../images/051024PIX/busine60.jpg)
Signage for a job fair is seen on 5th Avenue after the release of
the jobs report in Manhattan, New York City, U.S., September 3,
2021. REUTERS/Andrew Kelly/File Photo
![](http://archives.lincolndailynews.com/2024/May/10/images/ads/current/fcs_funeral_lda_border_04029022.png)
But if disinflation does resume, the punchy growth signals and
above-forecast first-quarter earnings season may well provide the
perfect backdrop for stock markets. The critical U.S. consumer price
inflation report is due next week.
Elsewhere, Asia bourses were also buoyed by the global picture. Hong
Kong's Hang Seng surged more than 2% to 9-month highs and is now
tracking year-to-date gains of 11% - ahead of equivalent gains in
the S&P500.
Bloomberg News reported China is considering a proposal to exempt
individual investors from paying dividend taxes on Hong Kong stocks
bought via the Stock Connect system.
Mainland Chinese shares were more subdued despite this week's upbeat
April trade numbers, with deteriorating bilateral relations with
Washington proving a drag.
U.S. President Joe Biden's administration on Thursday added 37
Chinese entities to a trade restriction list, including some for
allegedly supporting the spy balloon that flew over the United
States last year.
And Biden is also set to announce new China tariffs as soon as next
week targeting strategic sectors, including electric vehicles, a
source told Reuters.
What's more, the proportion of European firms that rank China as a
top investment destination has hit a record low, a European business
lobby group said on Friday.
Key diary items that may provide direction to U.S. markets later on
Friday:
* European Central Bank meeting minutes
* University of Michigan April household survey, U.S. April Federal
Budget; Canada April employment report
* Federal Reserve Board Governor Michelle Bowman, Fed Vice Chair for
Supervision Michael Barr, Dallas Fed President Lorie Logan,
Minneapolis Fed chief Neel Kashkari all speak; Bank of England chief
economist Huw Pill and BoE policymaker Swati Dhingra speak
(By Mike Dolan, editing by Christina Fincher, mike.dolan@thomsonreuters.com)
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